Bulgaria Makes Progress in Implementing Basel Core Principles

The Bulgarian banking sector has made significant strides in improving compliance with the Basel Core Principles (BCPs) for Effective Banking Supervision. According to a recent report, the country has achieved full compliance on several key principles, including CPs 1, 2, 4, 5, and 15.

Areas of Progress

The Bulgarian banking regulator has been working to address gaps in compliance by implementing comprehensive policies and practices across various aspects of banking supervision. These measures include:

• Introducing integrated risk management frameworks
• Enhancing loan granting and evaluation processes
• Strengthening capital adequacy requirements

Remaining Gaps

However, there are still areas that require attention. The report highlights the need for improvement in several areas, including:

• Capital adequacy (CP6)
• Loan evaluation (CP8)
• Large exposures (CP9)
• Market risks (CP12)
• Internal control (CP14)

Recommendations for Full Compliance

The report suggests specific recommendations for full compliance, including:

• Focusing on actual skills of bank managers
• Clarifying guidelines for write-offs and tightening rules for valuation of collateral (CP8)
• Implementing consolidated supervision and capital charges on a consolidated basis for interest rate and equity risks (CP12)

Background on the Basel Core Principles

The report’s findings are based on an assessment of Bulgaria’s compliance with the BCPs, which were developed by the Basel Committee on Banking Supervision to promote effective banking supervision. The BCPs cover a range of areas, including:

• Objectives and autonomy
• Permissible activities
• Licensing criteria
• Ownership transfer
• Risk management

Conclusion

While there is still work to be done, Bulgaria’s progress in implementing the BCPs is encouraging. The country’s efforts to strengthen its banking sector will help to promote financial stability and support economic growth.