On 3 November 2016, the Bulgarian National Bank ("BNB") published the first annual review of its plan for reform and further development of banking supervision in Bulgaria ("Plan"). The Plan, adopted in 2015, resulted from the insolvency of the fourth largest bank in Bulgaria and it manifests the supervisor’s intent to bring banking practices in compliance with international standards.

The Plan identified the following six problems that needed to be addressed:

  • an inadequate managerial model for exercising the BNB’s supervisory functions;

  • weaknesses in the internal organisation of the "Banking Supervision" Directorate;

  • inadequacies in the legislative framework, internal rules and handbooks which regulate banking supervision;

  • a lack of an institutional framework for crisis management and restructuring of banks;

  • poor informational, technological, and communicational aspects of the supervisory activity; and

  • inadequate coordination and exchange of information with other institutions.

The 2016 annual review of the Plan notes the following observations and conclusions:

  • all major reforms have been started and most of the targeted measures have been accomplished;

  • the full effect of the undertaken reforms will occur gradually;

  • there are some measures under the Plan which are yet to be accomplished (finalisation of legislative changes, finalisation of the restructuring banks’ plans, etc.);

  • in general, the Plan has played a major role in defining the immediate and strategic banking supervision tasks and has been the basis for the management of all reforms in the sector.

The BNB also stated that future steps will be based on:

  • conclusions and ideas for improving the supervision process received by the regulator as a result of the recent banks’ asset quality review tests; and

  • additional observations and recommendations from the International Monetary Fund and the World Bank in the process of their overall evaluation of the status of the financial sector in Bulgaria through the Financial Sector Assessment Program.