Bulgarian Banks Make Progress on Compliance with Basel Core Principles
Introduction
The Bulgarian banking sector has made significant progress in complying with the Basel Core Principles for Effective Banking Supervision. Despite some areas that require improvement, the country’s financial authorities have implemented numerous measures to strengthen bank governance and risk management.
Key Areas of Compliance
According to a recent report, Bulgarian banks have achieved full compliance in several key areas:
- Corporate governance
- Ownership transfer
- Investment criteria
- Credit policies
- Loan evaluation
- Connected lending
- Money laundering prevention
Additionally, the country has made progress in implementing:
- Consolidated supervision
- Internal control systems
- On-site and off-site supervision
Areas for Improvement
However, there are still some areas that require attention:
- Capital adequacy requirements: Bulgarian banks need to improve their capital adequacy requirements on a consolidated basis.
- Market risk management: There is a need for more explicit rules on market risk management practices.
- Other risks management: The report recommends developing policies for measuring, controlling, and managing other risks.
Recommendations
To achieve full compliance with the Basel Core Principles, Bulgarian banks are required to:
- Introduce and maintain comprehensive and integrated policies and practices for corporate governance, overall risk management, loan granting and evaluation, market risk management, and other risks.
- Improve internal control systems, including more explicit rules on roles and responsibilities and enhanced reporting requirements.
Conclusion
While there are still some areas that require improvement, Bulgaria has made significant progress in implementing the Basel Core Principles. With continued efforts to strengthen bank governance and risk management practices, the country is expected to achieve full compliance with these international standards in the near future.
Key Recommendations:
- Implement capital adequacy requirements on a consolidated basis
- Improve market risk management practices
- Develop policies for measuring, controlling, and managing other risks
- Enhance internal control systems, including more explicit rules on roles and responsibilities
- Improve reporting requirements for auditors and supervisors