With the proposed bill to amend and supplement the Credit Institutions Act, the Bulgarian banking supervision regulations are being updated to transpose Directive (EU) 2024/1619 (known as CRD VI). The draft introduces significant changes aimed at strengthening supervisory mechanisms, integrating ESG risks into bank management, and establishing a comprehensive regulatory framework for the activities of branches of third-country banks.
One of the key focuses is the extension of the “fit and proper” requirements for members of management bodies and persons in key positions in banks and investment firms. Institutions will have a clearer responsibility to ensure that these persons have the necessary knowledge, skills, and professional experience, while also taking into account the need for diversity in the professional profile and qualities of management bodies. The assessment of good reputation will cover a wider range of circumstances, including administrative sanctions and supervisory measures imposed.
The draft law also introduces a new, more detailed regime for access to the Bulgarian market for branches of third-country banks. It is envisaged that the BNB will classify these branches into different categories according to the risk they pose to financial stability and market integrity. More stringent requirements will apply to higher-risk and systemically important branches, including in terms of capital, liquidity, internal governance, and risk management. A requirement is introduced for branches to have at least two persons in Bulgaria responsible for the effective management of their activities, who meet the applicable requirements for reliability and professional suitability.
The draft also strengthens the supervisory role of the BNB, including through a clearer distribution of its competences within the Single Supervisory Mechanism and the introduction of additional risk assessment and control tools, especially for systemically important branches of third-country banks. New grounds for refusing or withdrawing a license are provided for where there are reasonable grounds to suspect violations of anti-money laundering and counter-terrorist financing requirements.
The possibility for the BNB to impose a periodic penalty as a coercive measure for each day of non-compliance by supervised banks has also been introduced, until the non-compliance continues. The aim is to put an end to the infringement as soon as possible by forcing the person concerned to comply with their obligation. The periodic penalty cannot be imposed for a period longer than six months. The imposition of a periodic penalty does not prevent the supervisory authority from applying a supervisory measure or a subsequent administrative penalty for the same act. It is envisaged that the amount of the periodic penalty payment will be imposed on the basis of the total annual net turnover of the person being penalized, with a definition being introduced that includes an exhaustive list of elements to be taken into account when calculating the penalty.
The forthcoming adoption of the amendments represents an important step in harmonizing the Bulgarian banking regulatory framework with European standards. For credit institutions, this will mean the need to review internal policies and procedures, more in-depth management of ESG risks, and preparation for the new requirements regarding the management and supervision of branches of third-country banks.
This article has been prepared for and is part of the Legal Digest issued by Penkov, Markov & Partners. The publications therein do not constitute legal advice and are not binding. Penkov, Markov & Partners reserves all rights to this material, and any distribution thereof is subject to the prior written consent of the law firm.
