Radoslav Milenkov: Banking supervision priorities
Publication of Mr Radoslav Milenkov, Deputy Governor (in charge of the Banking Supervision
Department) of the Bulgarian National Bank, in the Quarterly Bulletin of the Association of Banks
in Bulgaria, issue 57, April 2019.
* * *
A main priority of Banking Supervision is the participation in the process of effective accession to
the Single Supervisory Mechanism (SSM) within the three working blocks, on which work is done
at the Bulgarian National Bank.
The first one is the development of the required regulatory framework. Work in this area reached
an advanced stage at the end of the last year with the adoption by the National Assembly of the
necessary package of legislative amendments, allowing for the synchronisation of supervisory
processes between the ECB and the BNB, including by expanding the macro-prudential
supervision toolkit.
A review and possibly an amendment of the applicable domestic regulatory framework -
ordinances, guidelines - is pending with a view to achieving compliance with the ECB internal
technical regulations and reflecting the ECB's discretionally policy in key areas of prudential
supervision and risk management.
The second is to continue the process associated with the synchronization of the BNB's
supervisory and prudential practices with those of the European Central Bank, of the internal
rules and processes and of the information flows between the two institutions. The work done by
the BNB in this area is the logical extension of the reforms in the banking sector that started in
2015 and is expected to continue throughout 2019 with the following focal points:
• Development of an efficient organization for cooperation with the ECB within the supervisory
colleges and joint supervisory teams;
• Streamlining the supervisory strategy to match the new institutional reality resulting from the
close cooperation arrangements;
• Dividing the supervisory focus among important and less important institutions;
• Organisation of collection of supervisory and statistical data for supervisory purposes and
validation of supervisory reporting;
• Development of information systems consistent with the new stage in the supervisory activities.
The third working block relates to the organisation and carrying out of the asset quality review
and the stress test. The process is under way for the selected six banks and is conducted by
ECB in line with an ECB-adopted methodology and macroeconomic scenarios for the purposes
of the stress test. The bulk of the assumptions and parameters are determined by the Central
Project Steering Committee at the ECB with an established working communication between the
BNB, ECB and SSM in this process.
The Banking Supervision activities will continue through implementing the European regulatory
framework applicable to the credit institutions with a focus on the consistent implementation of
the technical standards and regulations, the Guidelines of the European Banking Authority and
the recommendations of the European Systemic Risk Board.
Priorities:
• Carrying on the practice of uninterrupted supervisory cycle by means of ongoing off-site control
and on-site inspections;
• The supervisory review and assessment of banks based on the approach developed in
alignment with the ECB Internal Guidelines and the Guidelines issues by the European Banking
Authority. The purpose of the supervisory review and assessment is to strengthen the link
between the dynamics of risks within the system, a bank's risk profile, its own funds, its liquid
assets and risk management systems and internal control environment, which would serve as
the basis for reaching an overall assessment of the viability of each credit institution individually;
• Continuing the policy of conservative macro-prudential supervision aiming at accumulation and
maintenance of capital buffers during the economic upturn. The objective is upholding the
stability of the banking system, including by preventing or reducing the systemic risks involved in
the activities of credit institutions and identifying and limiting the emergence of macroeconomic
factors that would threaten the stability of the banking system.