BULGARIA Law and Practice Contributed by: Nikolay Cvetanov, Boris Lazarov, Asen Apostolov and Patrizia Foffo, Penkov, Markov & Partners
the shares planned to be acquired and the size of the bank capital. The most important criteria taken into account by the BNB in its assessment of the application for approval are: • the reputation of the applicant; • the reputation, knowledge, skills and experi - ence of the members of the management body and supervisory board; • the financial stability of the applicant; • compliance of the bank of the supervisory requirements established on the basis of the existing statutory framework; • absence of grounds for reasonable doubt that, in connection with the requested acquisition, money laundering or financing of terrorism have been performed, is being performed or has been attempted, or that the requested acquisition would increase the risk of this, etc. It should be noted that the BNB also consid - ers the potential impact of the applicant on the credit institution or the banking sector, thus it might refuse issuance of the written approval in case of subjective criteria that the acquiring person would somehow have an adverse effect in the sector. 4. Governance 4.1 Corporate Governance Requirements When it comes to corporate governance of banks, the landscape is highly regulated. General Legal Regimes The following legal regimes are in place: • organisation and risk management of banks;
• policies and practices on remunerations in banks; • requirements for capital buffers and the terms and procedure for their formation and updat - ing – eg: (a) restrictions on dividend or interest pay - ments with regard to own funds; (b) conditions for compulsory coverage of losses by shareholders; and (c) other restrictions in case of established failure or for prevention of failure to meet the capital buffers requirements; • requirements regarding organisation, govern - ance and internal control of banks – eg, inter - nal rules of the bank which should include, among others: (a) a detailed description of a bank’s man - agement and organisational structure; (b) an exhaustive definition of powers and responsibilities of administrators and key personnel; (c) function holders in the bank, as well as a description of requirements for holding such positions; (d) the bank’s strategy and plan of activities; (e) a policy and structure of risk manage - ment and control; (f) appropriate and reliable accounting and financial reporting systems; (g) an effective internal control framework that includes independent risk manage - ment service, compliance function and internal audit service; (h) policy to establish, manage and prevent conflicts of interest; (i) procedure for reporting by employees of breaches committed within the bank; (j) code of ethics of administrators and em - ployees; and (k) system for providing training, evaluation and incentives to senior management and employees with supervisory functions;
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