The International Monetary Fund (IMF) said that Bulgaria has made progress in fixing the regulatory framework in the banking system to address deficiencies highlighted in the annual review of the country’s economy, known in IMF parlance as an “Article IV consultation”, in March.
The publication by the central bank of a detailed IMF and World Bank assessment report on banking supervision, along with the subsequent publication and initial implementation of a plan for reform of supervision, were “welcome” steps, IMF mission chief for Bulgaria Michele Shannon said in a statement published after her team concluded a visit to Sofia on November 9.
“At the same time, the transposition of the EU Bank Recovery and Resolution Directive this summer was an important step forward, and its implementation is on track, addressing key gaps in the resolution framework. The authorities are planning further steps towards strengthening the rules-based framework and internal controls for banking supervision and building a fully functioning bank resolution authority,” Shannon said.
As regards the asset quality review of Bulgarian banks, to be carried out next year, the Fund’s mission said that it was given assurances by authorities about their “commitment to a robust methodology and on-site review process, an effective communication strategy, and prompt follow-up.”
Last month, the Bulgarian National Bank picked Deloitte Bulgaria to carry out the asset quality review. Reports in Bulgarian media claimed that Deloitte’s local subsidiary was preferred over consultancy firms Oliver Wyman and Mazars, which do not have operations in the country, because it offered a lower price. At the same time, the pick raised questions about possible conflict of interest, given that Deloitte’s auditing arm was the auditor for six Bulgarian banks.
The Fund also praised the pre-emptive steps by the central bank to mitigate the potential impact on the banking system from the Greek crisis, which culminated in the introduction of capital controls in the summer. The IMF also said that the speedy confirmation of a new central bank governor and his deputies had “addressed an important source of policy uncertainty.”
(Bulgarian National Bank photo: Clive Leviev-Sawyer)