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

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Ordinance No 37 of the BNB 1
Ordinance No 37 of the BNB of 16 July 2018 on the Internal Exposures of Banks (Published in "State Gazette", No. 61 of 24 July 2018; amended and supplemented, No. 4 of 2026)
Chapter One
GENERAL PROVISIONS
Art. 1. This Ordinance regulates:
1. the requirements for banks' internal rules and procedures for establishing, identifying, monitoring and reporting internal exposures;
2. the method for calculating the value of banks' internal exposures;
3. the format and content of reports on internal exposures, as well as the procedure for submitting them to the Bulgarian National Bank (BNB).
Art. 2. (Am. – SG, No. 4 of 2026) (1) Decisions on establishing internal exposures shall be taken only by a unanimous decision of the board of directors or the management board of the bank, following prior approval by its supervisory board in banks with a two-tier management system. (2) Paragraph 1 shall not apply to the establishment of exposures to:
1. persons under Art. 45, para. 1, item 1 of the Credit Institutions Act (CIA), when the total exposure to a single person is within a limit previously determined by the supervisory board, respectively by the non-executive members of the board of directors;
2. persons under Art. 45, para. 1, items 2–9 of the CIA, when the total exposure to a single person is less than one percent of the bank's own funds, but not more than 150,000 euros.
(3) The limit under para. 2, item 1 shall be determined in accordance with the volume and scope of the bank's activities and established internal exposures, and may not exceed the sum of 150,000 euros to each single person. (4) Banks shall notify the BNB within 10 days from the adoption of a decision under para. 2.

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Chapter Two
REQUIREMENTS FOR INTERNAL RULES ON INTERNAL EXPOSURES Art. 3. (1) Banks shall adopt and apply internal rules and procedures for establishing, identifying, monitoring and reporting internal exposures, which shall regulate:
1. the procedure and method for establishing and identifying internal exposures and calculating their value;
2. mechanisms to ensure compliance with the law and internal rules regarding internal exposures;
3. the procedure for informing the management board (board of directors) of the bank about the size and credit quality of internal exposures;
4. the procedure for reporting internal exposures to the BNB.
(2) The rules and procedures shall ensure that the bank:
1. has information enabling it to identify in good faith and with due care the persons under Art. 45, para. 1 of the CIA;
2. prepares and maintains an up-to-date register of persons under Art. 45, para. 1 of the CIA and the exposures established to them;
3. adequately monitors and manages all risks relevant to the exposures.
(3) The rules and procedures shall include:
1. (Am. – SG, No. 4 of 2026) a documented internal process for tracing the line of control or qualified participation to the actual owner of the persons under Art. 45, para. 1 of the CIA, containing effective procedures for collecting, verifying and analysing the necessary information;
2. a procedure for identifying the main business partners of the persons under Art. 45, para. 1 of the CIA to whom the bank has exposures, and periodic updating of this information.
(4) The rules and procedures shall specify the specific obligations of the specialized internal audit service to carry out an audit of the process for establishing, monitoring and reporting internal exposures at least once a year. (5) When determining a qualified participation, the requirements of the Joint Guidelines on prudential assessment of acquisitions and increases of qualified holdings in the financial sector (JC/GL/2016/01) shall apply. Art. 4. Banks shall submit to the BNB a copy of the rules under Art. 3 within 10 days from their adoption, respectively from the introduction of amendments and supplements thereto.

Ordinance No 37 of the BNB 3
Chapter Three
REQUIREMENTS FOR CALCULATING THE VALUE OF INTERNAL EXPOSURES Art. 5. (1) (Supp. – SG, No. 4 of 2026) Banks shall determine the size of internal exposures constituting on-balance sheet items based on their gross book value. (2) (Am. – SG, No. 4 of 2026) Off-balance sheet items shall be recorded at nominal value without applying conversion factors, except for low-risk off-balance sheet items specified in Group 5 of Annex I to 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, L 176/1 of 27 June 2013), hereinafter referred to as "Regulation (EU) No 575/2013", which shall be recorded at 50% of their value. (3) When determining the value of internal exposures, provided collateral and other credit risk mitigation techniques shall not be taken into account. (4) (Am. – SG, No. 4 of 2026) When calculating the value of exposures under para. 1, assets in the form of advances that are not loans shall be included, in accordance with Art. 22(2) in conjunction with Part 1, para. 32 and Part 2, para. 85(j) of Annex V to Commission Implementing Regulation (EU) 2024/3117 of 29 November 2024 on establishing implementing technical standards for the application of Regulation (EU) No 575/2013 of the European Parliament and of the Council as regards the reporting of information by institutions to supervisory authorities and repealing Commission Implementing Regulation (EU) 2021/451 (OJ, series L of 27.12.2024), hereinafter referred to as "Implementing Regulation (EU) 2024/3117", as well as prepayments for leases or right-of-use assets. (5) (Am. – SG, No. 4 of 2026) In cases where a bank has established an exposure to a third party in the form of credits and advances, secured by a person under Art. 45, para. 1 of the CIA, the report shall include the amount of the exposure guaranteed by the collateral, provided that this amount shall not be taken into account when calculating the limit under Art. 45, para. 6 of the CIA. (6) (New – SG, No. 4 of 2026) If a credit institution secures a third-party exposure to a person within the scope of Art. 45 of the CIA through its own exposure, that exposure shall be included in the calculation of the value of exposures under paras. 1 and 2. Art. 6. (1) Banks shall determine their total exposure to each single person under Art. 45, para. 1 of the CIA as the sum of the values of the exposures under Art. 5.

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(2) Paragraph 1 shall not apply to exposures to other credit institutions and investment intermediaries.
(3) (Am. – SG, No. 4 of 2026) When determining the total size of exposures under para. 1, the following shall not be included:
1. investments in the capital of persons under Art. 45, para. 1 of the CIA, which are deducted from the bank's own funds;
2. exposures to the bank's subsidiaries, provided that the following conditions are met simultaneously:
a) the entity is a financial institution under Art. 4(1)(26) of Regulation (EU) No 575/2013; b) the entity is registered in the territory of the Republic of Bulgaria; c) the entity's activities are integrated into the bank's business model and correspond to its risk appetite; d) the entity is fully included in the same consolidation as the bank; e) the entity is closely integrated into the risk assessment, measurement and control processes applied by the bank, with adequate control mechanisms for its management by the bank, including periodic notifications to the bank's relevant control units on the size of assumed risks; f) there are no current or future substantial practical or legal impediments to the timely provision of capital support or repayment of obligations by the subsidiary to the bank;
3. exposures to state authorities, budgetary organizations and public enterprises.
(4) (New – SG, No. 4 of 2026) The exemption under para. 3, item 2 shall apply following prior approval by the BNB. To obtain approval, the bank shall submit an application accompanied by:
1. an up-to-date organizational structure of the group, data on the subsidiary and the bank's internal exposures to it;
2. a description of the risk management policy and how it is applied within the group and towards the subsidiary;
3. documents certifying the compliance of the risk management policy and risk assessment, measurement and control procedures with those within the group, including credit, market, liquidity and operational risk;
4. a description of the mechanisms for ensuring capital support and repayment of obligations in case of financial difficulties of any entity in the group;
5. a declaration from the persons managing and representing the bank and the subsidiary that there are no practical and legal impediments to the timely provision of capital support or repayment of obligations;
6. an independent legal opinion stating that there are no current or future substantial practical or legal impediments to the timely provision of capital support or repayment of obligations;
7. a document confirming payment of the supervisory fee.
(5) (New – SG, No. 4 of 2026) The Bulgarian National Bank may request the applicant to provide additional information within a specified period.
(6) (New – SG, No. 4 of 2026) The Bulgarian National Bank shall issue approval under para. 3, item 2 within a 3-month period from the submission of all necessary documents certifying compliance with the conditions for its issuance. (7) (New – SG, No. 4 of 2026) The Bulgarian National Bank shall refuse to issue approval if it finds that the conditions under para. 3, item 2 are not met, if the necessary data and documents are not submitted within the specified period, or if the submitted documents contain incomplete, contradictory or unreliable information. (8) (New – SG, No. 4 of 2026) Banks shall be obliged to notify the BNB of any change in the conditions for issuing the approval within 10 days from the change of circumstances. (9) (New – SG, No. 4 of 2026) Banks shall be obliged to account for and report the exposures under paras. 2 and 3 in accordance with this Ordinance. Art. 6a. (New – SG, No. 4 of 2026) The Bulgarian National Bank shall collect a fee of 1,500 euros for the examination of an application under Art. 6, para. 4.
Chapter Four
REPORTING AND NOTIFICATIONS
Art. 7. (1) (Am. – SG, No. 4 of 2026) Banks shall prepare and submit to the BNB reports on internal exposures in the format and content according to a template approved by the Deputy Governor of the BNB in charge of the "Banking Supervision" Directorate, within the quarterly reporting deadlines under Art. 3(1) of Commission Implementing Regulation (EU) 2024/3117. (2) The reports under para. 1 shall be submitted electronically in compliance with the requirements of the Electronic Document and Electronic Signature Act. (3) The reports under para. 1 shall be prepared on both an individual and a consolidated basis. Art. 8. (1) Banks shall submit to the BNB notifications on the establishment of an internal exposure in accordance with Art. 71(1)(5) of the CIA within 10 days from the adoption of a decision to establish an internal exposure or an approved limit therefor. The notification shall be accompanied by a minutes of the decision of the management and supervisory boards, respectively the board of directors of the bank, and the reporting form according to the template under Art. 7(1), containing data on the exposure.

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(2) Banks shall immediately notify the BNB upon finding a breach of the limits under Art. 45(6) of the CIA. In the notification, the bank shall indicate the reasons for the breach and the adopted plan and actions to bring the relevant exposure into compliance with the established limits. (3) Paragraph 1 shall not apply to a change in the size of an internal exposure when such change is within an approved limit of which the BNB has been notified.
Chapter Five
SUPERVISION OVER INTERNAL EXPOSURES
Art. 9. (1) The BNB shall use the reports and notifications on internal exposures by incorporating them into the supervisory review and evaluation process of banks' activities under Art. 79v of the CIA. (2) The BNB may require the submission of additional data and documents to verify compliance with the requirements of the CIA and this Ordinance. ADDITIONAL PROVISIONS § 1. For the purposes of this Ordinance:

1. "Internal exposure" means an exposure to a person under Art. 45, para. 1 of the CIA.
2. "Own funds" means the sum of Tier 1 capital and Tier 2 capital in accordance with Art. 4(1)(118) of Regulation (EU) No 575/2013.
3. "Actual owner" means a person within the meaning of § 2 of the Additional Provisions of the Anti-Money Laundering Act.
4. "Gross book value" means the accounting value of the exposure before applying the respective adjustments for specific credit risk, additional value adjustments in accordance with Art. 34, Art. 110 and other provisions of Regulation (EU) No 575/2013 governing similar adjustments.
5. (Am. – SG, No. 4 of 2026) "Off-balance sheet item" means an exposure from Annex I to Regulation (EU) No 575/2013.
6. (New – SG, No. 4 of 2026) "Budgetary organizations" means organizations within the meaning of § 1(5) of the Additional Provisions of the Public Finance Act.
7. (New – SG, No. 4 of 2026) "Public enterprises" means enterprises within the meaning of Art. 2 of the Public Enterprises Act.
   TRANSITIONAL AND FINAL PROVISIONS
   § 2. Banks shall be obliged to adopt the rules and procedures under Art. 3 within a 6-month period from the entry into force of the Ordinance.

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§ 3. This Ordinance is issued on the basis of Art. 45(8), Art. 45b and 45v of the Credit Institutions Act and was adopted by Decision No 191 of 16 July 2018 of the Management Board of the Bulgarian National Bank. ORDINANCE amending and supplementing Ordinance No 37 of 16 July 2018 on the Internal Exposures of Banks (Pub. – SG, No. 4 of 2026) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . TRANSITIONAL AND FINAL PROVISIONS § 8. Administrative proceedings pending upon the entry into force of this Ordinance shall be completed according to the previous procedure. § 9. This Ordinance is issued on the basis of Art. 45(8), Art. 45b and 45v of the Credit Institutions Act and was adopted by Decision No 636 of 22 December 2025 of the Management Board of the Bulgarian National Bank.