Ordinance No 37 of the BNB of 16 July 2018 on the Internal Exposures of Banks

1 Ordinance No 37 of the BNB
Ordinance 37 of the BNB of 16 July 2018 on the Internal Exposures of Banks (published in the Darjaven Vestnik, issue 61 of 24 July 2018; amended; Darjaven Vestnik, issue 4 of 2026)
Chapter One
GENERAL PROVISIONS
Article 1. This Ordinance shall provide for:
1. the requirements for internal banking rules and procedures regarding the formation, identification, supervision and
reporting of internal exposures;
2. the method for calculating the values of bank's internal exposures;
3. the form and content for reporting internal exposures, and the procedure for communicating them to the Bulgarian
National Bank (BNB).
Article 2. (amended; Darjaven Vestnik, issue 4 of 2026) (1) Decisions on the formation of internal exposures may be
taken only by a unanimous decision of the Board of Directors or the Management Board of the bank, following prior ap￾proval by its Supervisory Board in the case of banks with a two-tier system of governance. (2) Paragraph 1 shall not apply to the formation of exposures to:
1. persons under Article 45, paragraph 1, item 1 of the Law on Credit Institutions (LCI), where the total exposure to an
individual person is within a predetermined limit set by the Supervisory Board or by members of the Board of Directors who are not executive members, respectively;
2. the entities under Article 45, paragraph 1, items 2 – 9 of the LCI, where the total exposure to an individual entity is
less than one per cent of the bank’s own funds but not exceeding EUR 150,000.
(3) The limit under paragraph 2, item 1 shall be determined in accordance with the size and scope of the bank’s activities and the internal exposures formed by it without exceeding EUR 150,000 to each individual person. (4) Banks shall notify the BNB of the decision under paragraph 2 within ten days of its adoption.
Chapter Two
REQUIREMENTS TO INTERNAL RULES FOR INTERNAL EXPOSURES
Article 3. (1) Banks shall adopt and apply internal rules and procedures regarding the formation, identification, supervi￾sion and reporting of internal exposures which shall provide for:
1. the procedure and manner of formation and identification of internal exposures and calculation of their value;
2. mechanisms to ensure compliance with the law and internal rules regarding internal exposures;
3. the procedure for informing the bank’s management board (board of directors) of the size and credit quality of internal
exposures;
4. the procedure for reporting internal exposures to the BNB.
(2) Rules and procedures shall ensure that the bank:
1. has information at its disposal permitting it to identify in good faith and due diligence the entities under Article 45,
paragraph 1 of the LCI;
2. develops and maintains an up-to-date register of the entities under Article 45, paragraph 1 of the LCI and the internal
exposures thereto;
3. monitors and manages adequately all risks relevant to the exposures.
(3) Rules and procedures shall include:
1. (amended; Darjaven Vestnik, issue 4 of 2026) a documented internal process for tracing the line of control or a
qualifying holding up to the beneficial owner of the persons under Article 45, paragraph 1 of the LCI, including effective procedures for the collection, verification and analysis of the necessary information;
2. a procedure for identifying major business partners of the entities under Article 45, paragraph 1 of the LCI to which
the bank has exposures and regular updates of this information.
(4) Rules and procedures shall provide for the specific duties of the specialised unit of Internal Audit to check the pro￾cess of identifying, monitoring and reporting internal exposures at least annually. (5) In identifying qualifying holdings, the requirements of Joint Guidelines on the prudential assessment of acquisitions and increases of qualifying holdings in the financial sector (JC/GL/2016/01) shall apply.
Article 4. Banks shall submit to the BNB a copy of the rules under Article 3 within ten days of their adoption or amend￾ments thereto.

2 Ordinance No 37 of the BNB
Chapter Three
REQUIREMENTS FOR CALCULATING THE VALUE OF INTERNAL EXPOSURES
Article 5. (1) (amended; Darjaven Vestnik, issue 4 of 2026) Banks shall determine the amount of internal exposures
which constitute balance sheet items, based on their gross carrying amount.
(2) (amended; Darjaven Vestnik, issue 4 of 2026) Off-balance sheet items shall be reported at nominal value without ap￾plying conversion factors, with the exception of low-risk off-balance sheet items specified in bucket 5 of Annex I to Regula￾tion (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 L, 176/1 27. 6. 2013), hereinafter referred to as Regulation (EU) No 575/2013, which are reported at 50 per cent of their value. (3) In determining the value of internal exposures, no collateral and other credit risk mitigation techniques shall be taken into account. (4) (amended; Darjaven Vestnik, issue 4 of 2026) Assets in the form of advances, that are not loans, shall be included in calculating the value of exposures under paragraph 1, in accordance with Article 22, paragraph 2 in conjunction with Part One (32) and Part Two (85) point (g) of Annex V of Implementing Regulation (EU) 2024/3117 of 29 November 2024 laying down implementing technical standards for the application of Regulation (EU) No 575/2013 of the European Parliament and of the Council with regard to supervisory reporting of institutions and repealing Commission Implementing Regulation (EU) No 2021/451 (OJ L, 27.12.2024), hereinafter referred to as ‘Regulation (EU) 2024/3117’, as well as prepaid rentals or right of use. (5) (amended; Darjaven Vestnik, issue 4 of 2026) In cases where a bank has formed an exposure to a third party, which is an asset in the form of loans and advances for which a collateral has been provided by an entity under Article 45, para￾graph 1 of the LCI, the report shall include the portion of the exposure secured by such a collateral, and this portion shall not be taken into account when calculating the limit under Article 45, paragraph 6 of the LCI. (6) (new; Darjaven Vestnik, issue 4 of 2026) If a credit institution, through its own exposure, secures a third party’s ex￾posure to an entity falling within the scope of Article 45 of the LCI, that exposure shall be included in the calculation of the value of the exposures under paragraphs 1 and 2.
Article 6. (1) Banks shall establish their total exposure to a single person under Article 45, paragraph 1 of the LCI as a
sum of the values of exposures under Article 5.
(2) Paragraph 1 shall not apply to exposures to other credit institutions and investment intermediaries. (3) (amended; Darjaven Vestnik, issue 4 of 2026) When establishing the total amount of exposures under paragraph 1 the following shall not be included:
1. investments in the capital of entities under Article 45, paragraph 1 of the LCI, which are deducted from bank’s own
funds;
2. exposures to subsidiaries of the bank, where the following conditions are met simultaneously:
a) the company is a financial institution as defined in point (26) of Article 4(1) of Regulation (EU) No 575/2013; b) the registered office of the company is located on the territory of the Republic of Bulgaria; c) the company operations are integrated into the bank’s business model and are consistent with its risk appetite; d) the company is fully included into the same consolidation as the bank; e) the company is closely integrated in the risk evaluation, measurement and control processes implemented by the bank, with adequate control mechanisms being put in place for the management of that risk, including periodic notifications regarding the size of incurred risks to the relevant control units of the bank; f) there are no current or future material, practical or legal obstacles to the timely provision of capital support or the repayment of liabilities by the subsidiary to the bank.
3. exposures to government bodies, budget organisations and public enterprises.
(4) (new; Darjaven Vestnik, issue 4 of 2026) The exception under paragraph 3, item 2 shall be applied following prior approval by the BNB. In order to obtain the approval, the bank shall submit an application to which it shall attach:
1. the group’s current organisational structure, information about the subsidiary, and the bank’s internal exposures to it;
2. a description of the risk management policy and how it is implemented within the group and with respect to the
subsidiary;
3. documentation certifying that the risk management policy and the procedures for risk evaluation, measurement, and
control are consistent with those within the group, including credit, market, liquidity, and operational risk;
4. a description of the mechanisms for providing capital support and repaying liabilities in the event of financial difficul￾ties experienced by one of the entities in the group;
5. a declaration by the persons who manage and represent the bank and the subsidiary that there are no practical or
legal obstacles to the timely provision of capital support or the repayment of liabilities;
6. an independent legal opinion stating that there are no current or future material practical or legal obstacles to the
timely provision of capital support or the repayment of liabilities;
7. document certifying the payment of supervision fee.
(5) (new; Darjaven Vestnik, issue 4 of 2026) The Bulgarian National Bank may request that the applicant provide ad￾ditional information within a time limit specified by the Bank. (6) (new; Darjaven Vestnik, issue 4 of 2026) The Bulgarian National Bank shall issue an approval under paragraph 3, item 2 within three months of the submission of all necessary documents certifying compliance with the conditions for its issuance.

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(7) (new; Darjaven Vestnik, issue 4 of 2026) The Bulgarian National Bank shall refuse to grant approval if it finds that the conditions set forth in paragraph 3, item 2, have not been met, if the necessary data and documents have not been submitted within the specified time limit, or if the submitted data and documents contain incomplete, contradictory, or inac￾curate information. (8) (new; Darjaven Vestnik, issue 4 of 2026) Banks shall notify the BNB of any change in the conditions for granting the approval within ten days of the change in circumstances. (9) (new; Darjaven Vestnik, issue 4 of 2026) Banks are required to account for and report the exposures referred to in paragraphs 2 and 3 in accordance with this Ordinance.
Article 6а. (new; Darjaven Vestnik, issue 4 of 2026) The Bulgarian National Bank shall charge a fee of EUR 1,500 for
examining an application under Article 6, paragraph 4.
Chapter Four
REPORTING AND NOTIFICATIONS
Article 7. (1) (amended; Darjaven Vestnik, issue 4 of 2026) Banks shall draw up and submit to the BNB reports on
internal exposures in the form and with the content specified in a template approved by the BNB Deputy Governor head￾ing the Banking Department, within the deadlines for quarterly reporting set forth in Article 3, paragraph 1 of Implementing Regulation (EU) 2024/3117. (2) The reports under paragraph 1 shall be submitted electronically in compliance with the Law on Electronic Document and Electronic Signature. (3) The reports under paragraph 1 shall be drawn up on both individual and consolidated basis.
Article 8. (1) Within ten days from the resolution on formation of an internal exposure or an approved limit thereof,
banks shall submit to the BNB notifications of internal exposure formation pursuant to Article 71, paragraph 1, item 5 of the LCI. The notification shall be accompanied by a protocol of the resolution of the management and supervisory board, board of directors, respectively, and a reporting form according to the template under Article 7, paragraph 1, containing data on the exposure. (2) Banks shall immediately notify the BNB upon establishing breaches of the limits under Article 45, paragraph 6 of the
LCI. In the notification, the bank shall specify the reasons for the breach and the approved plan and actions taken to bring
the relevant exposure into line with statutory limits.
(3) Paragraph 1 shall not apply in case of a change in the size of the internal exposure, where this change is within the approved limit of which the BNB is notified.
Chapter Five
SUPERVISION OVER INTERNAL EXPOSURES
Article 9. (1) The BNB shall use the reports and notifications of internal exposures through incorporating them into the
supervisory review and evaluation process of banks under Article 79c of the LCI.
(2) The BNB may require any additional data and documents to be submitted to verify compliance with the requirements of the LCI and this Ordinance. ADDITIONAL PROVISION § 1. Within the meaning of this Ordinance:

1. ‘internal exposure’ shall be an exposure to an entity under Article 45, paragraph 1 of the LCI;
2. ‘own funds’ shall mean the sum of Tier 1 capital and Tier 2 capital within the meaning of Article 4, paragraph 1, item
   118 of Regulation (EU) No 575/2013.
3. ‘beneficial owner’ shall mean a person within the meaning of § 2 of the Additional Provisions of the Law on the Meas￾ures against Money Laundering.
4. ‘gross carrying value’ shall be the account value of the exposure before relevant specific credit risk adjustments and
   additional adjustments in accordance with Article 34, Article 110 and other provisions of Regulation (EU) No 575/2013 regulating such adjustments are imposed.
5. (amended; Darjaven Vestnik, issue 4 of 2026) ‘Off-balance sheet item’ shall mean an exposure of Annex I to Regula￾tion (EU) No. 575/2013.
6. (new, Darjaven Vestnik, issue 4 of 2026) ‘Budget organisations’ shall mean organisations within the meaning of § 1,
   item 5 of the Additional Provisions of the Law on Public Finance.
7. (new, Darjaven Vestnik, issue 4 of 2026) ‘Public enterprises’ are enterprises within the meaning of Article 2 of the
   Law on Public Enterprises.
   TRANSITIONAL AND FINAL PROVISIONS
   § 2. Banks shall adopt the rules and procedures under Article 3 within six months of the enactment of this Ordinance. § 3. This Ordinance is issued pursuant to Article 45, paragraph 8, Articles 45b and 45c of the Law on Credit Institutions and approved by Resolution No 191 of 16 July 2018 of the Governing Council of the Bulgarian National Bank.

4 Ordinance No 37 of the BNB
ORDINANCE on Amendment of Ordinance No 37 of 16 July 2018 on the Internal Exposures of Banks (published in the Darjaven Vestnik, issue 4 of 2026) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . TRANSITIONAL AND FINAL PROVISIONS § 8. Proceedings incumbent upon the entry into force of this Ordinance shall be completed under the previous procedure. § 9. This Ordinance is issued on the grounds of Article 45, paragraph 8 and Articles 45b and 45c of the Law on Credit Institutions, and is adopted by Resolution No. 636 of the Governing Council of the Bulgarian National Bank of 22 December 2025.