Ordinance No. 8 of the BNB of 27 April 2021 on Banks’ Capital Buffers

Ordinance No. 8 of the BNB Ordinance No. 8 of the BNB of 27 April 2021 on capital buffers, the combined buffer requirement, restrictions on distributions and the recommendation for additional equity (Published in the "State Gazette", No. 40 of 14 May 2021; amended and supplemented, SG, No. 55 of 2026)

Chapter One GENERAL PROVISIONS Subject Matter Art. 1. (1) This Ordinance determines the types of capital buffers and the conditions and procedures for their formation and updating, as well as the combined buffer requirement. (2) The Ordinance also determines:

1. restrictions on the payment of dividends or interest related to equity;
2. the conditions for the mandatory coverage of losses by shareholders and holders of the bank's equity instruments before covering losses through the use of other sources;
3. other restrictions that banks observe upon finding non-compliance or to prevent non-compliance with capital buffer requirements;
4. restrictions applicable upon finding non-compliance or to prevent non-compliance with the leverage ratio buffer requirement;
5. the procedure and conditions for applying the recommendation for additional equity.

Types of Capital Buffers and Combined Buffer Requirement Art. 2. (1) Capital buffers are:

1. capital conservation buffer;
2. institution-specific countercyclical capital buffer;
3. Global Systemically Important Institution (G-SII) buffer;
4. Domestic Systemically Important Institution (D-SII) buffer;
5. systemic risk buffer. (2) (Effective from 26 June 2021) The buffers referred to in para. 1, items 1, 2, 4 and 5 are applied on an individual and consolidated basis in accordance with Part One, Title Two of Regulation (EU) No 575/2013 of the European Parliament and of the Council of 26 June 2013 on prudential requirements for credit institutions and amending Regulation (EU) No 648/2012 (OJ, L176/1 of 27 June 2013), hereinafter referred to as "Regulation (EU) No 575/2013", and the buffer referred to in para. 1, item 3 is applied only on a consolidated basis. (3) The combined buffer requirement is the total amount of Common Equity Tier 1 capital required to meet the capital conservation buffer requirement, supplemented by the respective applicable buffers referred to in para. 1, items 2–5. (4) When a bank does not meet the requirements for maintaining the combined buffer requirement, the restrictions under Art. 17 apply to it.

Chapter Two CAPITAL CONSERVATION BUFFER Art. 3. In addition to the Common Equity Tier 1 capital maintained to meet the capital requirements under Art. 92(1)(a)–(c) of Regulation (EU) No 575/2013, banks maintain a capital conservation buffer of Common Equity Tier 1 capital equal to 2.5% of the total amount of their total risk exposure.

Chapter Three INSTITUTION-SPECIFIC COUNTERCYCLICAL CAPITAL BUFFER General Requirement Art. 4. Every bank maintains an institution-specific countercyclical capital buffer of Common Equity Tier 1 capital equal to the total amount of its risk exposure multiplied by the weighted average value of the countercyclical buffer levels, calculated in the manner provided in Art. 6(3).

Determination of the Countercyclical Buffer Level Art. 5. (1) The Bulgarian National Bank (BNB) calculates the level of the reference indicator, which assists in assessing the appropriateness of the countercyclical buffer level, in accordance with para. 3, every quarter. (2) The reference indicator reflects the credit cycle and risks arising from excessive credit growth in the country, and takes into account the characteristics of the national economy. The indicator is based on the deviation from the long-term trend of the credit-to-GDP ratio, taking into account:

1. the indicator for the growth of lending levels in the Republic of Bulgaria, and specifically the indicator reflecting changes in the ratio between loans granted and GDP;
2. the general guidelines of the European Systemic Risk Board (ESRB) for measuring and calculating the deviation from the long-term trend of the credit-to-GDP ratio and for preparing the indicators for calculating the buffer. (3) The BNB conducts an assessment and, if necessary, changes the level of the countercyclical buffer for banks in the country on a quarterly basis, taking into account:
3. the reference indicator prepared in accordance with para. 2;
4. the ESRB principles regarding the assessment of the appropriate level of the countercyclical buffer, guidelines on variable parameters that indicate the accumulation of systemic risks, including quantitative criteria indicating that the buffer should be maintained, changed, or its application fully terminated, as well as other ESRB recommendations for determining the buffer level;
5. other variable parameters that the BNB has deemed suitable for reflecting cyclical systemic risk. (4) The BNB determines the level of the countercyclical buffer applicable to credit risk exposures in the Republic of Bulgaria as a percentage between 0% and 2.5% of the total amount of these exposures, calibrated in intervals of 0.25 percentage points. Based on the assessment under para. 3, the BNB may determine a countercyclical buffer level above 2.5% of the total amount of risk exposures. (5) When the BNB first determines a countercyclical buffer level other than zero, or when it increases it, it also specifies the date from which each bank applies the increased buffer. This date is no later than 12 months after the announcement of the increased buffer in accordance with para. 7. If this date is before the expiration of the 12-month period, the BNB justifies this with relevant extraordinary circumstances. (6) If the BNB reduces the existing level of the countercyclical buffer, it determines a period during which an increase in the buffer is not expected. This period is not binding on the BNB. (7) The BNB announces on its official website the countercyclical buffer level determined for the quarter. The announcement includes at least the following data:
6. the applicable countercyclical buffer level;
7. the corresponding credit-to-GDP ratio, as well as its deviation from the long-term trend;
8. the reference indicator, calculated in accordance with para. 1;
9. justification for the buffer level;
10. when increasing the buffer level – the date from which banks apply the increased buffer level when calculating the institution-specific size of the countercyclical capital buffer;
11. when the date under item 5 is before the expiration of 12 months from the date of announcement under this paragraph – reference to the extraordinary circumstances justifying this shorter implementation period;
12. when reducing the buffer level – the period during which an increase in the buffer is not expected, along with justification for this period. (8) The BNB coordinates the timing of the announcement under para. 7 with the designated authorities of other Member States. (9) The BNB notifies the ESRB of any change in the countercyclical buffer level, as well as the data under para. 7.

Calculation of the Bank-Specific Level of the Countercyclical Capital Buffer Art. 6. (1) The bank-specific level of the countercyclical capital buffer applies to exposure classes under Art. 112(j)–(r) of Regulation (EU) No 575/2013, which are subject to:

1. capital requirements for credit risk under Part Three, Title Two of Regulation (EU) No 575/2013; or
2. capital requirements for specific risk under Part Three, Title Four, Chapter Two of Regulation (EU) No 575/2013 or for additional default risk and additional migration risk under Part Three, Title Four, Chapter Five of Regulation (EU) No 575/2013, when the exposure is part of the trading book; or
3. capital requirements under Part Three, Title Two, Chapter Five of Regulation (EU) No 575/2013, when the exposure is a securitisation position. (2) The bank-specific level of the countercyclical capital buffer represents the weighted average value of the countercyclical buffer levels applicable in the jurisdictions where the exposures under para. 1 are located, or which are applicable in accordance with Art. 8(1) and (2). (3) The weighted average value under para. 2 is calculated by multiplying the capital requirements for credit risk, calculated for the exposures under para. 1 in the relevant jurisdictions, by the applicable countercyclical buffer levels for those jurisdictions, and summing the resulting products. The resulting sum is divided by the total capital requirements for the exposures under para. 1. (4) When an authority of a Member State or a third country has determined a countercyclical buffer level higher than 2.5% of the total amount of risk exposures, banks licensed in the Republic of Bulgaria apply a countercyclical buffer level of 2.5% of the sum of the exposures under para. 1 in that country, unless the BNB has recognized the determined buffer level. (5) Paragraph 4 also applies when calculating capital requirements on a consolidated basis. (6) For the purposes of the calculation under para. 2 when increasing the buffer level:
4. the countercyclical buffer level for the Republic of Bulgaria applies from the date specified in the information announced in accordance with Art. 5(7), item 5;
5. the countercyclical buffer level above 2.5% for another Member State applies from the date specified in the information announced by the BNB in accordance with Art. 7(2), item 3;
6. the countercyclical buffer level up to 2.5% for another Member State applies from the date specified in the information announced by the authority responsible for determining the countercyclical buffer level in that Member State;
7. when the BNB has recognized the countercyclical buffer level for a third country in accordance with Art. 7 or has determined a countercyclical buffer level for a third country in accordance with Art. 8(1)–(3), this buffer level applies from the date specified in the information published in accordance with Art. 7(2), item 3 or Art. 8(5), item 3;
8. in cases other than item 4, the countercyclical buffer level for a third country applies 12 months after the date on which the change in the buffer level was announced by the relevant authority of the third country, regardless of whether that authority requires banks licensed in that third country to apply the change in a shorter period; the change in the countercyclical buffer level for a third country is deemed to have been announced on the date it was published by the relevant authority of the third country in accordance with applicable national legislation. (7) Banks identify the geographical affiliation of the relevant credit exposure in accordance with regulatory technical standards adopted by the European Banking Authority (EBA). (8) The countercyclical buffer level applies immediately if the result of this decision is a reduction in the buffer level.

Recognition of a Countercyclical Buffer Level Above 2.5% Art. 7. (1) When an authority responsible for determining the countercyclical buffer level of a Member State or a third country has determined a countercyclical buffer level above 2.5% of the total amount of risk exposures, the BNB may recognize this buffer level with respect to the exposures of banks in that country. (2) When the BNB recognizes a buffer level under para. 1, it announces on its official website at least the following data:

1. the applicable countercyclical buffer level;
2. the Member State or third country to which this buffer applies;
3. when increasing the buffer level – the date from which banks apply the increased buffer level;
4. when the period under item 3 is shorter than 12 months from the date of announcement – reference to the extraordinary circumstances necessitating this shorter implementation period.

BNB Decisions Regarding Countercyclical Buffer Levels for Third Countries Art. 8. (1) When no countercyclical buffer level has been determined and published by the relevant authority of a third country for that country, in which banks licensed in the Republic of Bulgaria have exposures, the BNB may determine the countercyclical buffer level that banks apply when calculating the institution-specific size of the countercyclical capital buffer. (2) When the countercyclical buffer level has been determined and published by the relevant authority of a third country, the BNB may determine a different buffer level for the third country that banks should apply if it deems that the buffer level determined by the relevant authority of the third country is insufficient to protect banks licensed in the Republic of Bulgaria from risks of excessive credit growth in that country. (3) In exercising the powers under para. 2, the BNB may not determine a countercyclical buffer level lower than the level determined by the relevant authority of a third country, except in cases where that level exceeds 2.5% of the total amount of risk exposures in the third country. (4) When the BNB determines a countercyclical buffer level for a third country under para. 1, 2 or 3, which increases the existing applicable countercyclical buffer level, the BNB decides on the date from which banks licensed in the Republic of Bulgaria apply this buffer level when calculating the institution-specific size of the countercyclical capital buffer. This date is no later than 12 months after the announcement of the increased buffer in accordance with para. 5. If this date is before the expiration of the 12-month period, the BNB justifies this based on relevant extraordinary circumstances. (5) The BNB announces on its official website the countercyclical buffer level for a third country determined by it under para. 1, 2 and 3, including the following information:

1. the countercyclical buffer level and the third country to which it applies;
2. justification for the buffer level;
3. when a countercyclical buffer level other than zero is determined for the first time, or when it is increased – the date from which banks apply this increased buffer level;
4. when the period under item 3 is shorter than 12 months from the date of announcement – reference to the extraordinary circumstances necessitating this shorter implementation period.

Chapter Four BUFFERS FOR GLOBAL SYSTEMICALLY IMPORTANT INSTITUTIONS AND FOR OTHER SYSTEMICALLY IMPORTANT INSTITUTIONS General Provisions Art. 9. (1) The BNB may identify on a consolidated basis a Global Systemically Important Institution (G-SII), as well as another Systemically Important Institution (D-SII) on an individual or consolidated basis, according to the methodologies in this Article. (2) A Global Systemically Important Institution may be:

1. a group headed by a parent credit institution from the European Union (EU), a parent financial holding company from the EU, or a parent mixed-activity financial holding company from the EU; or
2. a bank that is not a subsidiary of a parent credit institution from the EU, a parent financial holding company from the EU, or a parent mixed-activity financial holding company from the EU. (3) Another Systemically Important Institution may be a credit institution or a group headed by a parent credit institution from the EU, a parent financial holding company from the EU, a parent mixed-activity financial holding company from the EU, a parent credit institution, a parent financial holding company from a Member State, or a parent mixed-activity financial holding company from a Member State. (4) The methodology for identifying G-SIIs is based on the following criteria:
3. size of the group;
4. interconnectedness of the group with the financial system;
5. substitutability of the services or financial infrastructure provided by the group;
6. complexity of the group;
7. cross-border activity of the group, including cross-border activity between Member States and between a Member State and a third country. (5) Each criterion under para. 4 receives equal weight and consists of quantitatively measurable indicators. (6) The methodology provides a comprehensive rating for each assessed entity and allows any G-SII to be identified and assigned to a sub-category in accordance with Art. 10(2)–(6). (7) The BNB determines the systemic importance of D-SIIs based on at least one of the following criteria:
8. size;
9. significance for the economy of the Republic of Bulgaria or the EU;
10. significance of cross-border activities;
11. interconnectedness of the institution or group with the financial system. (8) The additional methodology for identifying G-SIIs is based on the following criteria:
12. the criteria under para. 4, items 1–4;
13. the cross-border activity of the group, excluding the group's activity in participating Member States under Art. 4 of Regulation (EU) No 806/2014 of the European Parliament and of the Council of 15 July 2014 establishing uniform rules and a uniform procedure for the resolution of credit institutions and certain investment firms in the framework of the Single Resolution Mechanism and the Single Resolution Fund and amending Regulation (EU) No 1093/2010. (9) Each criterion under para. 8 receives equal weight and consists of quantitatively measurable indicators, which for the criteria under para. 8, item 1 coincide with those under para. 5. (10) The additional methodology under para. 8 provides an additional overall rating for each assessed G-SII, which may serve as a basis for taking measures under Art. 10(6), item 3. (11) The BNB conducts an annual review of the identification of G-SIIs and D-SIIs and of the allocation of G-SIIs into the respective sub-categories, notifying the respective systemically important institution and the ESRB of the result and announcing on its official website the updated list of identified systemically important institutions and the sub-category into which each identified G-SII is allocated. The notification to the ESRB includes reasons for exercising or not exercising supervisory judgment under Art. 10(6). (12) When a group is subject to a consolidated G-SII buffer requirement and a D-SII buffer requirement, only the higher buffer applies.

G-SII Buffer Art. 10. (1) Every bank identified as a G-SII on a consolidated basis maintains a mandatory G-SII buffer corresponding to the sub-category to which it belongs. This buffer consists of Common Equity Tier 1 capital and is in addition to the basic equity covering the requirement under Art. 92(3) of Regulation (EU) No 575/2013. (2) The sub-categories of G-SIIs are at least five. (3) The lower limit and the limits between sub-categories are determined by the ratings determined by the identification methodology under Art. 9(4). (4) The ratings determining the boundary between adjacent sub-categories are clearly defined and follow the principle of constant linear increase in systemic significance, resulting in a linear increase in the requirement for additional Common Equity Tier 1 capital for each sub-category, except for the fifth sub-category and any added sub-category. Systemic significance is the expected impact of the G-SII's impact on the global financial market. (5) For the lowest sub-category, a G-SII buffer of 1% of the total value of risk exposure is determined, and the buffer for each sub-category increases by a step of at least 0.5% of the total amount of risk exposure up to and including the fourth sub-category. (6) Based on supervisory judgment, the BNB may:

1. move a G-SII from a lower to a higher sub-category;
2. allocate an entity referred to in Art. 9(2), with an overall rating lower than the lowest limit, to the lowest or a higher sub-category, designating it as a G-SII;
3. based on the additional rating under Art. 9(10), move a G-SII from a higher to a lower sub-category. (7) The BNB informs the ESRB and announces the names of the G-SIIs it has identified and the respective sub-categories into which each is allocated.

D-SII Buffer Art. 11. (1) The BNB may require every D-SII on a consolidated or individual basis, as applicable, to maintain a D-SII buffer of up to 3% of the total value of risk exposure. This buffer consists of Common Equity Tier 1 capital. (2) With the approval of the European Commission (EC), the BNB may require a buffer under para. 1 higher than 3% of the total value of risk exposure, which also consists of Common Equity Tier 1 capital. (3) The determination of D-SII buffers should not lead to disproportionate negative consequences for the entire or parts of the financial system of other Member States or the EU as a whole, and should not create obstacles to the functioning of the internal market. The determined buffer is reviewed by the BNB at least once a year. (4) One month before announcing the decision under para. 1 to determine or change a D-SII buffer, the BNB notifies the ESRB. The notification contains a detailed description of:

1. the justification for the likelihood that the D-SII buffer will be an effective and proportionate means of reducing risk;
2. an assessment of the likely positive or negative impact of the D-SII buffer on the internal market, made based on available information;
3. the level of the D-SII buffer that the BNB intends to determine. (5) In the cases under para. 2, the notification under para. 4 is made three months before the announcement. (6) When a D-SII is a subsidiary of a G-SII or D-SII that is an institution or group with an EU parent enterprise and a D-SII buffer requirement on a consolidated basis is determined for the enterprise, the buffer applicable on an individual basis for the subsidiary may not exceed the lower of the two values:
4. the sum of 1% of the total risk exposure and the higher of the G-SII or D-SII buffer levels applicable to the group on a consolidated basis; and
5. 3% of the total risk exposure or the level for which the EC has given permission to apply to the group on a consolidated basis. (7) The BNB informs the ESRB and announces on its official website the names of the D-SIIs it has identified.

Provision of Information via the European Single Access Point Art. 11a. (New – SG, No. 55 of 2026) (1) The BNB provides the information under Art. 9(11), Art. 10(7) and Art. 11(7) via the European Single Access Point under Art. 1(1) of Regulation (EU) 2023/2859 of the European Parliament and of the Council of 13 December 2023 on the creation of a European Single Access Point providing centralized access to publicly available information relevant to financial services, capital markets and sustainable development (OJ, L 2023/2859 of 20 December 2023), hereinafter referred to as "Regulation (EU) 2023/2859". (2) The information under para. 1 is provided in a data extraction format under Art. 2, item 3 of Regulation (EU) 2023/2859 and is accompanied by the following metadata:

1. the name of the natural person, respectively the name of the legal entity, to which the information relates;
2. the identification code of the legal entity, where applicable;
3. the type of information, as classified under Art. 7(4)(v) of Regulation (EU) 2023/2859;
4. indication of whether the information contains personal data.

Chapter Five SYSTEMIC RISK BUFFER General Requirements Art. 12. (1) The BNB may determine a systemic risk buffer, covered by Common Equity Tier 1 capital, for the banking sector, for part of it, for all or a group of exposures under para. 3, with the aim of preventing and reducing macroprudential or systemic risks that:

1. are not covered by Regulation (EU) No 575/2013, the countercyclical capital buffer, and the G-SII and D-SII buffers; and
2. could cause disruptions in the financial system and severe negative consequences for it and for the real economy in the Republic of Bulgaria. (2) Every bank calculates the applicable systemic risk buffer for it