Bulgaria Takes Steps to Improve Banking Supervision

In an effort to enhance its banking supervision framework, Bulgaria has initiated several initiatives aimed at improving compliance with the Basel Core Principles for Effective Banking Supervision.

Initiatives to Improve Compliance

To achieve better compliance, the Bulgarian National Bank (BNB) is working on introducing:

• Consolidated reporting of certain prudential ratios
• Stricter rules for collateral valuation
• Policies for country risk

These measures are expected to significantly improve compliance with several Core Principles, including:

• CP 6: Capital adequacy
• CP 8: Loan evaluation
• CP 9: Large exposures
• CP 11: Country risk
• CP 12: Market risks
• CP 18: Internal control
• CP 20: Supervision of foreign establishments
• CP 23: Risk management and internal control
• CP 25: Supervision of foreign establishments

Ongoing Efforts to Address Gaps

The BNB is also requiring banks to develop comprehensive policies and practices for:

• Corporate governance
• Risk management
• Loan granting and evaluation
• Market risk management
• Other risks

These improvements aim to address remaining gaps in compliance with the Core Principles.

Current Compliance Status

Bulgaria is already fully compliant with several principles, including:

• CP 1: Objectives, autonomy, powers, and resources
• CP 2: Supervisory strategy
• CP 4: Banking supervision practices
• CP 5: Institutional framework
• CP 10: Public information and transparency
• CP 15: Cooperation and coordination with other authorities
• CP 16: Confidentiality
• CP 22: Integrity of the banking system
• CP 24: Protection of depositors

However, Bulgaria falls short in areas such as:

• Capital adequacy (CP 6)
• Loan evaluation (CP 8)
• Large exposures (CP 9)
• Country risk (CP 11)
• Market risks (CP 12)
• Internal control (CP 14)
• Other risks (CP 13)

Future Plans

The report concludes that while Bulgaria has made significant progress in improving its banking supervision framework, there is still more work to be done to achieve full compliance with the Core Principles. The BNB’s efforts are expected to continue in the coming years, focusing on:

• Introducing regulations and policies for interest rate risks
• Operational risk
• Legal risk

Table 1: Bulgaria’s Compliance with Basel Core Principles

Note: The table reflects the degree of compliance with each Core Principle based on the Essential Criteria and Additional Criteria. A “X” indicates that Bulgaria is largely or fully compliant, while a “-” indicates no information available.