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

world economy are in fact in recession and the prospect for the world as a whole turns very much on what happens in the major industrial countries. in essence, what we have seen is a brutally sharp cutback in capital flows to much of the emerging world and to some of the transition economies, creating a corresponding need for urgent improvement in their current accounts. this has caused massive currency depreciations and forced the emerging countries to make equally sharp cutbacks in domestic demand. the counterpart is a sharp decline in net external demand in the industrial countries, which, if it were not to be offset by action to stimulate domestic demand in those countries, could indeed lead to weakening global activity and price deflation. in fact to varying degrees, reflecting differing assessments of how far our particular currency areas are expected to be affected by the world slowdown and different starting points, relating both to our assessment of trends in domestic demand, and of how close we were initially to full capacity, both the uk and the euro - zone, as well as the us, have acted fairly aggressively to reduce interest rates since the autumn ; and japan has moved to more active fiscal stimulus. and if the global economic prospect, and net external demand in the industrial countries, were to deteriorate further, then it would be right to contemplate further moves in the same direction – consistently with our aim of effective price stability. what we all aim to do – as i said earlier – is to keep aggregate demand in line with the supply capacity of our economies. we have no interest in the creation of unnecessary spare capacity in our economies as a whole, nor in a fall in the underlying general price level. but that will still inevitably mean a sharp deterioration in the balance of payments of the industrial countries, collectively and probably individually, reflecting the imbalance between external and domestic demand growth in the industrial economies. and that in turn is bound to mean substantial pressure on the internationally - exposed sectors of the economy, not just in this country but throughout the industrial world, and we are already seeing ample evidence of that. in the case of this country these adverse international influences really began to affect us just as overall demand was already weakening in response to the earlier monetary, and incidentally fiscal, tightening. the result was a very sharp decline in industrial – especially manufacturing – confidence, and widespread, and often exaggerated, fears of recession, which in turn appeared to undermine consumer confidence. the slowdown – or soft landing – we had been consciously seeking to engineer