BNB Receives Passporting Notification from Home Member State Competent Authority

The Bulgarian National Bank (BNB) has received a passporting notification from the home member state competent authority, which may lead to conditions being imposed on the activity of banks in Bulgaria if deemed necessary by the BNB to ensure compliance with applicable laws aimed at protecting public interest.

Restrictions on Ownership and Foreign Ownership

Companies registered in tax haven jurisdictions and persons controlled by them are prohibited from applying for a banking license or participating in credit institutions in Bulgaria. However, there are exemptions under the Tax Haven Companies Act for:

• Publicly traded companies
• Those where the parent company is resident for tax purposes in a jurisdiction with which Bulgaria has a double taxation treaty

Shareholder Assessment

The BNB conducts a thorough assessment of applicants’ shareholders as part of its overall evaluation process. A banking license may be refused if:

• Shareholders controlling more than 3% of votes may harm the reliability or security of the bank through their actions or influence
• Persons subscribing for 10% or more of shares do not meet requirements for acquiring a qualifying holding or higher shareholding in compliance with the CIA
• The origin of funds used for capital contributions by shareholders is unclear and illegitimate

Requirements for Proposed Acquisition and Acquirer of Qualified Holding

Prior approval from the BNB is required for any person or persons acting in concert to acquire shares or voting rights related to shares in a bank licensed in Bulgaria if their shareholding becomes qualified (10% or more) or reaches relevant thresholds. The regulator assesses factors such as:

• Reputation
• Financial stability
• Compliance with supervisory requirements

Regulatory Capital and Liquidity

Bulgarian banks are typically funded through deposits (83% of liabilities). Wholesale funding is used sparingly, but could increase in importance given inflation and rising interest rates. As a matter of regulatory law and prudential requirements, banks must:

• Adopt funding and liquidity plans
• Maintain liquid funds to cater for cash flow mismatches
• Monitor interest rate risk
• Adjust the maturity structure of assets and liabilities upon changes in market conditions
• Maintain information about its liquidity position at any moment

The BNB will hold preliminary consultations and cooperate with competent supervising authorities in other member states where the applicant has a regulated entity. The regulator considers various factors, including:

• Reputation
• Financial stability
• Compliance with supervisory requirements

when assessing applications for approval.