Bulgarian Covered Bonds - Bulgaria

1	What type of assets may be included in the cover pool?
	Primary assets Substitution assets Public sector assets Mortgage assets Other 1* Other 2* Other 3*   Exposures to public sector entities x Exposures to credit institutions x Residential mortgage loans x Commercial mortgage loans x Senior MBS issued by third parties x Group originated MBS x Ship loans x Exposures to multilateral development banks x Derivatives x Exposures to institution with 1st rank of credit quality under Chapter 2, Section 2 of CRR. x
2	What is the geographical scope of assets?
	Primary assets Substitution assets Public sector assets Mortgage assets Other 1* Other 2* Other 3*   Domestic x x Multilateral development banks x EU x x For further information please see comments section at the end of the questionnaire
3	Is there a maximum level for substitute assets in the statutory national framework?	Yes, please specifiy max 15% of the principal amount of outstanding covered bonds
4	Are there any reporting requirements for covered bond issuers to investors?	Yes, by law
5	What is the frequency of reporting to investors?	Quarterly

1	What is the basis for property valuation	Market value Comparative, income and cost methods and other related to them applicable methods.
2	Is a regular update of the property value required?	Yes, new external physical apraisal within a specific time span
3	What are the LTV limits (single asset based)? Please specify in %/n.a.	Residential Commercial Other assets According to the respective originators internal policies and requirements. No specific requirements were included in the Ordinance No42 adopted by Bulgarian National Bank.
4	Are loans in excess of LTV limits eligible for inclusion in the cover pool?	Other, please specify Not specified

IV.1 Derivative contracts in the cover pool

1	Are derivative contracts eligible for the inclusion in the cover pool?	Yes, exclusively for hedging purposes (by law)
2	Are there requirements for derivative contracts (e.g. eligibility criteria for hedging counterparties)?	Yes, specified in law
3	Will derivative contracts remain in case of insolvency of the issuer?	Yes
4	If derivatives are permitted in the cover pool, what is their ranking?	Not applicable

IV.2 Exposure to market risk

1	What is the primary method for the mitigation of market risk?	Natural' matching (i.e. match funding, matching without the use of off-balance sheet instruments) and stress testing
2	Are there mitigating provisions for interest rate risk?	No
3	Are there mitigating provisions for foreign exchange risk?	No
4	Are there mitigating provisions for maturity mismatch risk?	No
5	What type of coverage test is applied?	Nominal cover
6	Are there stress scenarios applied?	Yes, by law

IV.3 Liquidity risk

1	Is exposure to liquidity risk mitigated?	Yes, by law
2	What liquidity risk mitigation requirements are in place (principal)?	180 days liquidity provisions
3	What liquidity risk mitigation requirements are in place (interest)?	180 days liquidity provisions Reserve fund requirements
4	What is the consequence of not fixing a breach of liquidity risk mitigants?	Administrative penalty
5	If 180 days liquidity provisions are in place, what types of liquid assets are eligible	LCR Level 1 LCR Level 2a LCR Level 2b Short term exposures to credit institutions (Credit Quality Step (CQS) 1) Short term exposures to credit institutions (CQS 2) Short term deposits to credit institutions (CQS 1) Short term deposits to credit institutions (CQS 2) Short term deposits to credit institutions (CQS 3)
6	If 180 days liquidity provisions are in place, the calculation of principal is based on:	The (extended) legal final maturity date

IV.4. Maturity extension

1	Is maturity extension allowed by national law?	Yes, but optional and subject to conditions
2	Is it possible to issue…	Soft bullet
3	Which trigger plays a role for maturity extension according to law - independent or alone or in combination?	Issuer bankruptcy/resolution Lack of liquidity; breach of liquidity rules Issuer failure to pay Other Other: the special administrator. The special administrator may change the maturity of a covered bond issue. An advance written permission from the BNB is required.
4	Does any competent authority need to give its okay (or non-opposition)?	Yes

IV.5 Overcollateralisation

1

Is mandatory overcollateralisation required in the law ?

Overcollateralisation over the nominal value - 5% - Nominal

V.1 Cover pool monitor (CPM)

1	Is there a cover pool monitor in addition to national competent authorities in the statutory law?	Yes, by law
2	Is the CPM separate from the issuing credit institution?	Yes, required by national statutory law A cover monitor may be a bank authorised in the Republic of Bulgaria or in another Member State or an audit company.
3	Is the appointment, dismissal, eligibility criteria and the role of the CPM regulated by the national statutory law?	Yes

V.2 Banking supervision

1	Which are the national competent authorities designated to carry out covered bonds public supervision in the law?	Bulgarian National Bank (BNB) - Website Financial Supervision Commission (FSC) - Website FSC in case of listed covered bonds
2	Is a special permission required for a covered bond programme according to national law?	Yes, licence for institution + competent autority
3	Is there a covered bond issuance limit in law or regulation? If yes, please specify	No
4	Does the national statutory law provide for the appointment of a dedicated cover pool administrator in case of insolvency/resolution (transfer included acc. to BRRD [Bank Recovery and Resolution Directive])?
5	Which is the typical frequency in the national statutory law of reporting from the covered bond issuers to the designated competent authorities?	Quarterly

1	Does the national statutory law meet the requirements laid down in the EU Covered Bond Directive?	Yes
2	Does the statutory law meet the requirements of Article 129 of CRR [Capital Requirement Regulation]? In this case, please specify the collateral types meeting the Art. 129 CRR.	Yes All types of collateral envisaged in Art. 129 CRR.
3	Does the statutory law allow covered bonds out of the scope of Art 129 of CRR? In this case, please specify the collateral	No
4	Are listed covered bonds eligible in repo transactions with the national central bank?	No

Primary Legislation

• Bulgarian Covered Bonds Law (BG).pdf (Original language)
• Bulgarian Covered Bonds Act (with translation) (ENG).pdf (English language)
• Ordinance No42 of BNB for the requirements on Covered Bonds Issues (BG).pdf (Original language)

Hypostat

• Bulgaria.pdf (English language)

Fact Book

• 3.6 Bulgaria.pdf (English language)

Intro CB Video

Any further comments/information?

Section II.2: The cover pool may also include primary assets secured by physical collateral assets which are located or, respectively, which are recorded in a register in a third country wherewith the Republic of Bulgaria has agreements for the protection of investment and for the avoidance of double taxation in force and wherein the issuing bank or a bank belonging to the same group is established. The exposure to any such assets may not exceed 20 per cent of the principal amount of outstanding covered bonds. (2) The cover pool may also include primary assets secured by physical collateral assets which are located or, respectively, which are recorded in a register in a third country wherewith the Republic of Bulgaria has agreements for the protection of investment and for the avoidance of double taxation in force and wherein the issuing bank or a bank belonging to the same group is established, subject to the requirements of Paragraphs (3) and (4). The exposure to any such assets may not exceed 20 per cent of the principal amount of outstanding covered bonds. (3) Any assets referred to in Paragraph (2) may be included in the cover pool only if the issuing bank has at its disposal an independent expert opinion confirming that the said assets offer a level of security similar to that of the physical collateral assets which are located in a Member State, as well as a legal opinion that the arrangements for obtaining satisfaction from the said assets, inter alia with regard to the applicable procedures and time limits, are equivalent to the arrangements for obtaining satisfaction from assets located in a Member State. (4) The banks issuing covered bonds whereof the cover pool includes any assets referred to in Paragraph (2) shall adopt rules and procedures which provide for verifying on a regular basis that the assets in the third countries concerned conform to the requirements of this Act.