A Bill for the Amendment and Supplementation of the Credit Institutions Act has been introduced, providing for amendments to the national legal framework governing prudential supervision and aligning Bulgarian legislation with the requirements of the European Union. The key amendments envisaged by the Bill may be summarized as follows:

1. Enhanced supervisory oversight of bank and financial group restructurings

The Bill introduces clearer approval requirements for mergers and demergers involving banks and holding companies.

The competent authority (the Bulgarian National Bank (BNB) or the European Central Bank (ECB), depending on the applicable competence) will assess:

• the financial stability of the institution or group following the restructuring;
• the risks arising for banks and banking groups;
• the reputation and regulatory compliance of the entities involved;
• the feasibility and credibility of the proposed restructuring plan; and
• the risk of money laundering and terrorist financing.

2. New regulatory regime for financial holding companies

The proposed amendments provide for:

• a dedicated approval regime for financial holding companies and mixed financial holding companies;
• the possibility of exemption from approval requirements under certain conditions;
• clearer rules regarding the allocation of responsibilities within banking groups; and
• new requirements for supervision on a consolidated and sub-consolidated basis.

3. Strengthened supervision of branches of third-country banks

The Bill establishes a comprehensive and more stringent regulatory framework, including:

• minimum endowment capital requirements for branches;
• enhanced liquidity and capital requirements;
• mandatory maintenance of assets in Bulgaria or with the Bulgarian National Bank;
• expanded reporting obligations to the BNB;
• the possibility of requiring a branch to obtain a banking licence where it is considered systemically important; and
• a dedicated supervisory framework, including cooperation colleges with supervisory authorities from other jurisdictions.

4. New rules for systemically important branches and groups

The amendments introduce:

• an assessment process for determining whether a third-country branch is systemically important;
• asset-based thresholds, including thresholds at the EU level;
• the possibility of imposing additional prudential requirements or requiring organisational restructuring; and
• enhanced coordination among national competent authorities, the European Banking Authority (EBA), and other supervisory authorities within the European Union.

5. Stricter requirements regarding liquidity, risk management and internal controls

The Bill expands the regulatory framework governing:

• liquidity management and capital adequacy;
• internal risk models, including market risk models;
• stress testing and supervisory review thereof;
• operational resilience and information and communication technology (ICT) risks; and
• environmental, social and governance (ESG) risks over the short-, medium- and long-term horizons.

6. Transparency and reporting obligations

In order to enhance the transparency and accountability of credit institutions and banks, the following measures are envisaged:

• more detailed public disclosure requirements;
• prioritisation of electronic publication over traditional media announcements;
• obligations for credit institutions to submit information to the European Banking Authority (EBA);
• audit reports incorporating assessments of compliance with key regulatory requirements.

7. Amendments Concerning the Withdrawal of Banking Licences

The Bill introduces greater flexibility with respect to the withdrawal of banking licences, including:

• the possibility for a bank voluntarily to surrender its banking licence;
• a procedure for licence withdrawal following the prior settlement of obligations and relationships with customers; and
• the possibility for the legal entity to continue carrying out other business activities after the withdrawal of its banking licence.

8. Enhanced supervisory cooperation and coordination within the European Union

 The proposed amendments provide for:

• strengthened cooperation between the BNB, the EBA and supervisory authorities across the European Union;
• the establishment of supervisory colleges for groups operating branches in multiple jurisdictions; and
• enhanced information exchange and joint decision-making mechanisms in the context of group supervision.

The Bill for the Amendment and Supplementation of the Credit Institutions Act has been approved at first reading by the Parliamentary Committee on Budget an