Strengthening Stability: Priorities and Challenges for Bulgarian Banking Supervision

The outlook for Bulgaria’s banking sector is shaped by its deepening integration with European regulatory standards and the evolving risks in a dynamic financial landscape.

In recent years, the accession to the European Banking Union has marked a significant milestone, underscoring a renewed commitment to a robust and resilient banking sector. The national supervisory agenda remains firmly focused on ensuring stability, resilience to shocks, and the banking sector’s capacity to support Bulgaria’s broader economic ambitions. This will be achieved by applying strict supervisory standards, including continuous assessment of banks’ ability to maintain prudent provisioning policies, strong capital positions, and effective risk management frameworks.

Supervisory efforts will pay particular attention to high-risk areas such as loan granting, non-performing exposures, and internal risk identification, with an emphasis on early detection of potential financial distress among borrowers. Close dialogue with smaller banks will continue, especially regarding their dividend and share buyback plans, ensuring these institutions maintain healthy capital trajectories and conservative assumptions in their business planning.

The Bulgarian National Bank (BNB) continues to lead in macroprudential oversight, maintaining one of the highest combined capital buffer requirements in Europe. This cautious approach is seen as vital in safeguarding banks’ capacity to lend, even amid economic uncertainties like the pandemic or geopolitical disruptions. At the same time, supervisory policy is evolving to match the rapid digital transformation sweeping the sector. Special initiatives have been established to develop expertise in overseeing digitalisation and cybersecurity, recognizing that technological advancement both accelerates industry change and introduces new operational risks.

Effective measures against money laundering and terrorist financing also remain a top priority for banking supervision. National and European authorities work closely to implement preventive frameworks and regularly review bank compliance to reduce financial crime risk, adhering to both European and local guidelines.

As the banking sector continues to evolve, Bulgarian supervision will increasingly tailor its strategies to individual risk profiles, imposing stricter oversight on banks with greater complexity or elevated risks. This proactive and adaptive approach aims to ensure timely risk identification and correction, reinforcing the financial system’s resilience.

The continued focus on strong supervision, risk prevention, and adaptability to new technological and regulatory demands is crucial for safeguarding Bulgaria’s banking sector and supporting sustainable economic growth.