Financial Crime World

EU Adopts Decisions on Financial Safety Net and Crisis Management

The European Union has recently adopted decisions on financial safety net and crisis management, making them legally binding and directly applicable in all EU member states.

Strengthening the Financial Safety Net and Crisis Management Framework

These decisions aim to strengthen the financial safety net and crisis management framework, taking into account Bulgaria-specific challenges and emerging international best practices and standards. The note is particularly informed by:

  • Key Attributes
  • Basel Core Principles for Effective Banking Supervision
  • Core Principles for Effective Deposit Insurance Systems

Financial Safety Net

The financial safety net comprises four domestic authorities in Bulgaria:

  • Bulgarian National Bank (BNB)
  • Financial Supervision Commission (FSC)
  • Bulgarian Deposit Insurance Fund (BDIF)
  • Ministry of Finance

The note expands the definition of the financial safety net to include a fourth component: recovery and resolution of financial institutions.

Crisis Management

Effective crisis management requires tools and procedures that allow authorities to respond decisively when a crisis materializes. This includes:

  • Advance preparation with contingency planning
  • Comprehensive tools and powers
  • Sufficient funds
  • Efficient procedures for both domestic and foreign agencies

Financial Oversight Architecture

Bulgaria’s financial safety net is represented in the EU Economic and Financial Affairs Council (Ecofin) but not in the Eurogroup. Bulgarian authorities are an integral part of many other European Union cooperative arrangements.

  • The BNB is the monetary authority and prudential and resolution authority for banks.
  • The FSC is the resolution authority for investment firms and jointly with its sectoral deputy chairpersons, the prudential supervisor for all non-bank financial institutions.

Conclusion

These decisions are a significant step forward in strengthening the financial safety net and crisis management framework in the EU, ensuring greater stability and resilience in the face of financial crises.