site.btaMPs Pass Amendments to Bank Recovery and Resolution Act

The National Assembly approved at second reading government-proposed amendments to the Law on the Recovery and Resolution of Credit Institutions and Investment Firms.

Under the amendments, entities undergoing liquidation will not be subject to a minimum requirement for own funds and eligible liabilities. However, the restructuring authority may determine that setting an individual requirement above the amount needed to cover losses is justified. In making such a decision, the authority will consider the potential impact on financial stability and the risk of jeopardising the broader financial system, including the funding capacity of the Bulgarian Deposit Insurance Fund.

A further provision specifies that an entity not designated for resolution, but which is a subsidiary of a resolvable institution or of a third-country entity that would be subject to resolution if established within the European Union, must deduct its exposures in equity instruments of subsidiary institutions from the same resolution group that are subject to liquidation and for which no requirement has been set by the resolution authority. This applies when the combined value of those positions equals or exceeds 7% of the total amount of eligible own funds and liabilities. The aggregate amount is calculated annually, as of December 31, as an average over the preceding 12 months.

The amendments align Bulgarian legislation with EU Regulation 2022/2036 of the European Parliament and of the Council of October 19, 2022, concerning the prudential treatment of global systemically important institutions applying a multiple-point-of-entry resolution strategy and the methods for indirect subscription of instruments eligible for meeting the minimum requirement for own funds and eligible liabilities. The deadline for transposing these requirements into national law was November 15, 2023.