EN ECB -PUBLIC  
 
OPINION OF THE EUROPEAN CENTRAL BANK  
of 19 November  2018  
on the macroprudential mandate  of Българска народна банка (Bulgarian National Bank) and the 
governance of credit institutions  
(CON/20 18/52) 
 
Introduction and legal basis  
On 19 October 2018 the European Central Bank (ECB) received a request from the Minister for  Finance 
for an opinion on a draft law amending the Law on credit institutions  (hereinafter the ‘draft law’) . 
The ECB’s competence to deliver an opinion is based on Articles 127(4) and 282(5) of the Treaty on the 
Functioning of the European Union and the third and sixth indents of Article 2(1) of Council Decision 
98/415/EC1, as the draft law relates to Българска народна банка (Bulgarian National Bank (BNB)), rules 
applicable to financial institutions insofar as they materially influence the stability of financial institutions 
and markets and the tasks conferred upon the ECB concerning the prudential supervision of credit 
institutions pursuant to Article 127(6) of the Treaty . In accordance with the first sentence of Article 17.5 of 
the Rules of Procedure of the European Central Bank, the Governing Council has adopted this opinion.  
 
1. Purpose of the draft law  
1.1 Introduction  
The draft law amends the Law on credit institutions2 with two main objectives . First , it aims to 
supplement the mandate of BNB to conduct the macroprudential supervision of credit institutions . 
Second,  it aims to  ensure that national legislation in the field of corporate governance of credit 
institutions better complies with internationally accept ed practices . 
1.2 BNB’s macroprudential mandate  
The draft law proposes to expand the macroprudential toolkit of BNB. To thi s end the draft law 
proposes to supplement the existing general macroprudential mandate of BNB3 with a number of 
specific macroprudential tools, including the following competences: (i) to collect information for 
macroprudential purposes ; (ii) to monitor, identify and assess systemic risks;  (iii) to develop and 
implement national measures to mitigate macroprudential or systemic risk identified at the level of a 
Member State under Article 458 of Regulation (EU) No 575/2013 of the European Parliament and 
                                                 
1 
 Council Decision 98/415/EC of 29 June 1998 on the consultation of the European Central Bank by national 
authorities regarding draft legislative provisions (OJ L 189, 3.7.1998, p. 42).  
2  Published in Darjaven Vestnik  No 59, 21 July 2006.  
3  See Article 79(2) of the Law on credit institutions.  
ECB -PUBLIC  
2 of the Council4; (iv) to develop and implement measures to limit systemic risks stemming from the 
accumulation of excessive credit growth (i.e. borrower- based measures) ; (v) to develop and 
implement measures to limit the risk of concentration to certain econom ic sectors and industries ; 
(vi) to develop and implement additional minimal requirements in respect of liquidity ; and (vii) to 
carry out any other actions necessary to achieve BNB’s macroprudential objectives.  
1.3 Fit and proper assessments and g overnance of c redit institutions  
The draft law revises the requirements for the governance arrangements  to be adopted and 
updated by credit institutions5. A new draft provision introduces the requirement that the members 
of management bodies  of credit institutions  shoul d collectively have sufficient knowledge, skills and 
experience to ensure the risk associated with business is managed in a way that guarantees the 
stable management  of the credit institution . Another proposed provision seeks to ensure that at 
least one of  the m embers of the management body  of a credit institution is independent , while for 
significant credit institutions and credit institutions whose shares have been admitted to trading on 
a regulated market, the independent members must be no less than a t hird of the total  number.  
The draft law specifies that only significant credit institutions are required to establish a nomination 
committee . Significant credit institutions are defined in the draft law as those designated as 
significant by BNB due to thei r size and internal organisation, as well as in view of the nature, scale 
and complexity of the business t hey conduct6. 
The draft law introduces requirements for key function holders and sets out the procedure for ex-
post authorisation of key functions hol ders by BNB.  Key function holders comprise inter alia the 
chief financial officer  and the heads of the internal audit, regulatory compliance and risk 
management units7. 
The draft law specifies the powers of BNB with regard to the approval of the appointment of 
members of the management bodies  and procurators8 and provides that BNB would issue an 
ordinance to specify the internal procedure f or credit institutions to report  breach es9. 
 
2. General observations  
2.1 The ECB understands that the part of the draft law which relates to the macroprudential mandate of 
BNB is proposed to be adopted as a result of the commitments made by the Republic of Bulgaria in 
policy areas which are of high relevance for a smooth transition to, and participation in, the 
European Exchange Rate Mechanism10. 
                                                 
4  Regulation (EU) No 575/2013 of the European Parliament and of the Council of 26 June 2013 on prudential 
requirements for credit institutions and investment firms and amending Regulation (EU) No 648/2012 (OJ L 176, 
27.6.2013, p. 1).  
5  See proposed amendment to Article 73 of the Law on credit institutions.  
6  See proposed new points 50 and 51 in paragraph 1 of the additional provisions of the Law on credit ins titutions.  
7  See proposed new Article 11a of the Law on credit institutions.  
8  See proposed amendment to Article 11 of the Law on credit institutions.  
9  See proposed amendment to Article 74(4) of the Law on credit institutions.  
10  See press release,  ‘Statement on Bulgaria's path towards ERM II participation’ , 12 July 2018, available at 
www.consilium.europa.eu.   
ECB -PUBLIC  
3 2.2 The draft law does not extend the current macroprudential mandate of BNB.  As a national 
macroprudential authority , BNB is already responsible for the macroprudential supervision of credit 
institutions  in order to maintain the stability of the banking system and to ensure the prevention or 
reduction of both systemic risks resulting from the activity of credit institutions and the identification 
and limitation of the incidence of macroeconomic factors threatening the stability of the banking 
system11. The draft law does not confer genuinely new tasks on BNB, but rather specifies certain 
new macroprudential tools that BNB may use when discharging its macroprudential responsibilities. 
Consequently, it is not necessary to assess  whether the confer ral of new tasks on a national 
central bank complies with the prohibition of monetary financing.  
2.3 The ECB understands that the draft law seeks to supplement the implementation in Bulgarian law 
of the governance provisions in Sub- section 3, Section II, Chapt er 2, Title VII of Directive 
2013/36/EU  of the European Parliament and of the Council12 with additional elements derived from 
internationally accepted practices, notably the respective guidelines by the European Banking 
Authority  (EBA) and the European Securities and Markets Authority  (ESMA)13. In this regard,  the 
ECB understands that pursuant to Article 74a of the Law on credit institutions, credit institutions 
established in Bulgaria already have to apply the EBA guidelines, recommendations and other 
measur es concerning them to the extent of BNB’s compliance with such guidelines , 
recommendations or  other measures . 
2.4 The ECB notes  that the governance requirements for credit institutions are set out in the Law on 
credit institutions and may be further specified in BNB ordinances14. The ECB therefore 
understands that the draft law may in the future be supplemented by provisions on the governance 
of credit institutions  adopted by means of  BNB ordinances.  
2.5 The ECB also notes that  on 18 July 2018 the Republic of Bulgar ia filed a request to establish close 
cooperation between the ECB and BNB, in line with the existing procedures established under 
Article 7 of Council Regulation (EU) No 1024/201315 and under Decision ECB/2014/5 of the 
European Central Bank on close cooperation16. This opinion is without prejudice to the assessment 
to be conducted by the ECB in accordance with Article 4 of Decision ECB/2014/5, which will 
include a broader assessment of the relevant national legislation, also taking into account the 
practical implementation of such legislation.  
                                                 
11  See Article 79(2) of the Law on credit institutions.  
12  Directive 2013/36/EU of the European Parliament and of the Council of 26 June 2013 on access to the activity of 
credit institutions and the prudential supervision of credit institutions and investment firms, amending Directive 
2002/87/EC and repealing Directives 2006/48/EC and 2006/49/EC (OJ L 176, 27.6.2013, p. 338).  
13  EBA Guidelines on i nternal governance under Directive 2013/36/EU (EBA/GL/2017/11) and Joint ESMA and EBA 
Guidelines on the assessment of the suitability of members of the management body and key function holders under 
Directive 2013/36/EU and Directive 2014/65/EU (EBA/GL/201 7/12).  BNB has indicated that it intends to comply with 
both guidelines as of 1 January 2019. See compliance tables on the EBA’s website.  
14  See for example Ordinance No. 7 of 24 April 2014 on organisation and risk management of banks ( Darjaven Vestnik 
No 40, 13 May 2014) , Ordinance No. 10 on the Internal Control in Banks ( Darjaven Vestnik  No 108, 12 December 
2003)  and Ordinance No. 20 of 28 April 2009 on the Issuance of Approvals to the Members of the Management 
Board (Board of Directors) and Supervisory B oard of a Credit Institution and Requirements for Performing their 
Duties ( Darjaven Vestnik No 36, 15 May 2009) . 
15  Council Regulation (EU) No 1024/2013 of 15 October 2013 conferring specific tasks on the European Central Bank 
concerning policies relating to the prudential supervision of credit institutions (OJ L 287, 29.10.2013, p.  63).  
16  Decision ECB/2014/5 of the European Central Bank of 31 January 2014 on the close cooperation with the national 
competent authorities of participating Member States whos e currency is not the euro (OJ L 198, 5.7.2014, p. 7).  
ECB -PUBLIC  
4  
3. Specific observations  
3.1 Observations regarding BNB’s macroprudential mandate  
The ECB welcomes the clarification of the details of BNB’s macroprudential toolkit. The objectives 
of the draft law are also in line with the pr inciples set out in the Recommendation ESRB/2013/1 of 
the European Systemic Risk Board17 on intermediate objectives and instruments of 
macroprudential  policy, in particular with regard to the objective to mitigate and prevent excessive 
credit growth and lev erage18. 
From a financial stability perspective, the ECB welcomes the implementation of a legislative 
framework for borrower -based measures19. The ECB takes positive note of the fact that BNB may 
activate part or all of the abovementioned tools, thereby resp onding in a flexible and proportionate 
way to potential risks to financial stability. A thorough quantitative impact assessment is, however, 
important to verify the effect and appropriateness of the new tools when they are activated20. 
3.2 Observations regarding fit and proper assessments and governance of credit institutions  
The ECB welcomes the proposed changes in the draft law and understands that the draft law may 
in the future be supplemented by provisions regarding fit and proper assessments and the 
governance of credit institutions adopted by means of BNB ordinances, also with a view to 
ensuring compliance of the Bulgarian legal framework with the relevant Union rules.   
 
 
This opinion will be published on the ECB’s website.  
 
 
Done at Frankfurt am Main, 19 November  2018 . 
 
[signed]  
 
The President of the ECB  
Mario DRAGHI  
                                                 
17  Recommendation ESRB/2013/1 of the European Systemic Risk Board of 4 April 2013 on intermediate objectives and 
instruments of macro- prudential policy (OJ C 170, 15.6.2013, p. 1).  
18  See paragraph 2.2 of Opinion CON/2017/11, paragraph 2.3 of Opinion CON/2017/21, paragraph 3.1 of Opinion 
CON/2018/9.  
19  See press release,  ‘Governing Council statement on macroprudential policies ’, 15 December 2016,  at 
www.ecb.europa.eu . See also,  paragraph 2.3 of Opinion CON/2017/11, paragraph 2.4 of Opinion CON/2017/21 and 
paragraph 3.2 of Opinion CON/2018/9.  
20  See paragraph 3 .2 of Opinion CON/201 8/9.