General Information & Client Service
  • Americas: +1.212.553.1653
  • Asia: +852.3551.3077
  • China: +86.10.6319.6580
  • EMEA: +44.20.7772.5454
  • Japan: +81.3.5408.4100
Media Relations
  • New York: +1.212.553.0376
  • London: +44.20.7772.5456
  • Hong Kong: +852.3758.1350
  • Tokyo: +813.5408.4110
  • Sydney: +61.2.9270.8141
  • Mexico City: +001.888.779.5833
  • Buenos Aires: +0800.666.3506
  • São Paulo: +0800.891.2518
March 22, 2019

IMF published its staff report and selected issues report under the 2019 Article IV consultation with Bulgaria. Directors commended the authorities’ progress in strengthening financial supervision, including implementing the new governance framework, strengthening legislation for related-party lending, and formalizing the supervisory review and evaluation process (SREP). They welcomed the recent decline in non-performing loans (NPLs) and encouraged the central bank to ensure that banks with high NPLs maintain sufficient capital buffers. Directors noted that the country's preparations for Banking Union would help support reforms and enhance the quality of institutions, including by strengthening financial sector supervision.

The staff report highlighted that the Bulgarian National Bank (BNB) has made steady progress in strengthening banking sector supervision. Consistent with the recommendations of the 2017 Financial Sector Stability Assessment (FSSA), BNB has strengthened the legislation for related-party lending and formalized SREP, with the calibration of the bank-specific Pillar II capital add-on expected to be finalized by March 2019. Furthermore, BNB has operationalized the new governance framework, which vests the decision-making authority on banking supervision and payments in the Governing Council. BNB also announced that the countercyclical capital buffer will be raised from 0% to 0.5% as of October 2019. Furthermore, profitability and asset quality of banks continue to improve. Higher lending activity and lower impairment costs have helped raise banking sector profitability to its highest levels since the global financial crisis.

The report noted that NPLs have declined, from 16.9% of total loans in 2013 to 8.7% in the third quarter of 2018. BNB intends to comply with the EBA guidelines on NPLs, which will enter into force in mid-2019. Given that the NPL ratio of Bulgaria remains well above the EU average, BNB should maintain its vigilance on NPLs. The implementation of SREP should ensure that banks with high NPLs have sufficient capital buffers. Staff advises that improving the insolvency framework and NPL market (which has been supported by high liquidity in financial markets) would also help. The authorities are also taking steps to fulfill the Exchange Rate Mechanism II (ERM II) commitments. Additional key developments are as follows:

  • BNB is supporting comprehensive assessment of the banking sector by ECB. Joining the Banking Union, along with the ERM II, will further strengthen banking supervision, with ECB as the central supervisor of financial institutions in Bulgaria. Bulgaria is also joining the single resolution mechanism. 
  • BNB Act has been amended to align central bank independence provisions with EU legislation.
  • The legal framework for borrower-based macro-prudential measures has been established.
  • The authorities have made progress with regard to the non-bank financial sector, including implementing a risk-based supervisory system for insurers and pension funds and adopting guidelines for the valuation of assets and liabilities.
  • In cooperation with the Structural Reform Support Service of EC, the authorities are conducting a review to develop an efficient procedure for publishing information about insolvency proceedings. Work is also underway to identify inefficiency and weakness in the insolvency process.

The selected issues report examines governance reforms and presents areas for further reforms in Bulgaria. It provides an overview of various aspects of governance in Bulgaria, bringing out its relative strengths and weaknesses. The report also highlights key governance challenges and corresponding reforms.


Related Links

Keywords: Europe, Bulgaria, Banking, Insurance, NPLs, SREP, CCyB, FSSA, Article IV, Basel III, Banking Union, IMF

Related Articles

EP Resolution on Proposal for Sovereign Bond Backed Securities

The European Parliament (EP) published adopted text on the proposal for a regulation of the European Parliament and of the Council on sovereign bond-backed securities (SBBS).

April 16, 2019 WebPage Regulatory News

FDIC Consults on Approach to Resolution Planning for IDIs

FDIC approved an Advance Notice of Proposed Rulemaking (ANPR) and is seeking comment on ways to tailor and improve its rule requiring certain insured depository institutions (IDIs) to submit resolution plans.

April 16, 2019 WebPage Regulatory News

HKMA Decides to Maintain Countercyclical Capital Buffer at 2.5%

HKMA announced that, in accordance with the Banking (Capital) Rules, the countercyclical capital buffer (CCyB) ratio for Hong Kong remains at 2.5%.

April 16, 2019 WebPage Regulatory News

EP Approves Agreement on Package of CRD 5, CRR 2, BRRD 2, and SRMR 2

The European Parliament (EP) approved the final agreement on a package of reforms proposed by EC to strengthen the resilience and resolvability of European banks.

April 16, 2019 WebPage Regulatory News

PRA Seeks Input and Issues Specifications for Insurance Stress Tests

PRA announced that it will conduct an insurance stress test for the largest regulated life and general insurers from July to September 2019.

April 15, 2019 WebPage Regulatory News

PRA Finalizes Policy on Approach to Managing Climate Change Risks

PRA published the policy statement PS11/19, which contains final supervisory statement (SS3/19) on enhancing banks’ and insurers’ approaches to managing the financial risks from climate change (Appendix).

April 15, 2019 WebPage Regulatory News

EC Launches Pilot Phase on Implementation of Ethical Guidelines for AI

EC launched a pilot phase to ensure that ethical guidelines for the development and use of artificial intelligence, or AI, can be implemented in practice.

April 15, 2019 WebPage Regulatory News

EBA Single Rulebook Q&A: First Update for April 2019

EBA published answers to nine questions under the Single Rulebook question and answer (Q&A) updates for this week.

April 12, 2019 WebPage Regulatory News

EIOPA Statement on Application of Proportionality in SCR Supervision

EIOPA published a supervisory statement on the application of proportionality principle in the supervision of the Solvency Capital Requirement (SCR) calculated in accordance with the standard formula.

April 11, 2019 WebPage Regulatory News

FED Updates Form and Supplemental Instructions for FR Y-9C Reporting

FED updated the form and supplemental instructions for FR Y-9C reporting. FR Y-9C is used to collect data from domestic bank holding companies, savings and loan holding companies, U.S intermediate holding companies, and securities holding companies with total consolidated assets of USD 3 billion or more.

April 11, 2019 WebPage Regulatory News
RESULTS 1 - 10 OF 2920