Bulgaria’s Banking Supervision Under Scrutiny: Compliant on Most Fronts, but Lags Behind on Key Issues

Sofia, Bulgaria - Bulgaria’s banking supervision has been found to be largely compliant with the Basel Core Principles for Effective Banking Supervision, according to a recent assessment. While the country has made significant strides in improving its supervisory framework, it still lags behind on several key issues.

Assessment Highlights

The assessment, conducted by international experts, found that Bulgaria is:

Fully compliant with 9 of the 25 core principles
Largely compliant with 14 principles
Non-compliant with one principle

The Bulgarian National Bank (BNB) has introduced various initiatives aimed at improving compliance with the Basel Core Principles.

Progress and Challenges

Notable areas where Bulgaria has made progress include:

Consolidated reporting
Stricter rules for collateral valuation
Introduction of policies for country risk management

However, the assessment highlighted several areas that require improvement, including:

Corporate governance
Overall risk management
Loan granting and evaluation policies

Recommendations for Improvement

The assessment recommends that Bulgaria’s banking supervisor should focus on:

Actual skills of managers
Structure of the bank
Corporate governance when licensing banks
High-level management decisions on risky or unusual loans
Adequate systems for collecting past due loans

Additionally, the country’s banking sector is still grappling with issues related to:

Market risks
Other risks
Internal control

The assessment recommends that Bulgaria introduce regulations and policies for managing these risks, as well as implement more explicit rules on the roles and responsibilities of different management bodies.

Conclusion

While Bulgaria’s banking supervision has made significant strides in improving compliance with the Basel Core Principles, there are still areas that require improvement. The country’s banking supervisor must continue to focus on addressing these issues to ensure a safe and sound banking sector for Bulgarian consumers.

The country’s banking sector is considered stable, with a low level of non-performing loans and a strong capital adequacy ratio. Bulgaria’s banking supervision has made significant progress in recent years, but there is still work to be done to ensure a robust and effective supervisory framework.