Requirements for Financial Institutions in Bulgaria: Definition, BNB Register and Ongoing Obligations

Licences, Fintech

In Bulgaria, a company must be entered in the Financial Institutions’ Register of the Bulgarian National Bank (BNB) if activities such as financial leasing, guarantee transactions or factoring are material to its business. This guide sets out the requirements for financial institutions in Bulgaria, from the legal definition and the minimum capital to the rules for managers, owners and reporting. For the documents to submit with the application, see our guide on how to register a financial institution in Bulgaria.

Key facts

Legal basis: the Credit Institutions Act and BNB Ordinance No 26 of 23 April 2009 on Financial Institutions.

Material activity threshold: regulated activities making up at least 30 per cent of the company’s total activity, by net income or by book value of assets.

Legal form: a Bulgarian limited liability company, joint-stock company (registered shares only) or limited partnership with shares.

Minimum capital: €511,292, paid in cash from own funds and maintained as equity at all times.

Managers: a university degree and at least 3 years’ experience in economics, law, finance or informatics.

Reporting: quarterly and annual financial reports to the BNB by the 20th of the month after each reporting period, with records kept for at least 5 years.

What is a financial institution in Bulgaria?

The regulation of financial institutions is laid down in the Credit Institutions Act (CIA) and Ordinance No 26 of 23rd of April 2009 on Financial Institutions (Financial Institutions’ Ordinance) of the Bulgarian National Bank (BNB).

A financial institution is a person whose principal activity is to carry out one or more of the following activities:

• Payment services within the meaning of the Payment Services and Payment Systems Act;
• Issuance and administration of other means of payment (traveller’s cheques and letters of credit);
• Financial leasing;
• Guarantee transactions;
• Trading for own account or for the account of clients in foreign currency and precious metals, with the exception of derivative financial instruments on foreign currency and precious metals;
• Money brokerage;
• Acquisition of credit receivables and other forms of financing (factoring, forfeiting, etc.);
• Issuance of electronic money, including electronic money tokens;
• Acquisition of equity interests;
• Granting loans with funds that are not raised through public investment or other repayable funds.

An investment intermediary, financial holding, mixed financial holding, investment holding, payment institution, electronic money company and management company are also financial institutions. An insurance holding and mixed insurance holding are not financial institutions.

Who must register in the BNB Financial Institutions’ Register?

In order to engage in financial leasing activities, guarantee transactions, acquisition of credit receivables or activities representing another form of financing (factoring, forfeiting, etc.) in connection with loans other than those falling within the scope of the Loan Servicers and Loan Purchasers’ Act, acquisition of equity interests in credit and financial institutions and granting loans with funds not raised through public attraction of deposits or other repayable funds, the person must be entered in a public register of the BNB (Financial Institutions’ Register), if one or more of these activities is material to it. The criteria for determining a material activity are set out in the Financial Institutions’ Ordinance.

The BNB refuses entry into the Financial Institutions’ Register if the applicant does not meet the requirements for entry or if the necessary data and documents are not submitted or the submitted data contains incomplete, contradictory or false information.

What information does the Financial Institutions’ Register contain?

The Financial Institutions’ Register contains the following data for each registered financial institution:

• Registration number of the entry, number and date of the order of the Deputy Governor of the BNB, Head of the Banking Supervision Department, for the entry;
• Identification number;
• Name and legal organisational form;
• Registered office address, correspondence address and contact persons;
• Activities carried out by occupation;
• Number and date of the order of the Deputy Governor of the BNB, Head of the Banking Supervision Department, for deletion from the Financial Institutions’ Register and the reason for this;
• Other information regarding the financial institution.

The Financial Institutions’ Register is public, accessible electronically and updated through a single automated system based on the data provided by the registered persons.

What are the requirements for financial institutions in Bulgaria?

To be entered in the Financial Institutions’ Register, the person must meet the following requirements:

• Has commercial registration in the Republic of Bulgaria as a limited liability company, joint-stock company or limited partnership with shares;
• The relevant regulated activities must be expressly stated in its objects;
• It has equity with a structure and in an amount not less than €511,292;
• If the company is organised as a joint-stock company, its shares may only be registered;
• The place of performance of the main business activities must be on the territory of the Republic of Bulgaria;
• The persons managing and representing the company must possess the necessary qualifications, professional experience and reputation, and the persons who directly or indirectly own a qualifying shareholding in the company’s capital must have reliability, financial stability and reputation.

The 30% Material Activity Test

Substantial activity of a financial institution is present when the relative share of regulated activities is not less than 30 per cent of the total activity of the legal entity according to its financial statements. The ratio is calculated based on net income from a significant activity compared to income from the total volume of activity or the book value of the asset corresponding to the significant activity compared to the total amount of assets. The calculation of the ratio does not take into account investments related to participation in companies other than credit and financial institutions.

For a newly established company the ratio is calculated based on data from financial reports after the first two quarterly reporting periods following the date of registration with the BNB as a financial institution.

Upon a reduction of the ratio, the financial institution notifies the BNB of this circumstance. If the ratio is not maintained for a period exceeding one year, the BNB removes the financial institution from the Financial Institutions’ Register on its own initiative, unless the financial institution has already requested such removal.

Minimum Capital for a Financial Institution in Bulgaria

The minimum required paid-in capital for entry in the Financial Institutions’ Register is €511,292.

Contributions to the minimum required capital must be in cash and made with own funds. 

Contributions are deemed to have been made with own funds when, on the date of making the contribution:

• With regard to natural persons – the difference between their available funds in bank accounts and the amount of their liabilities is greater than the amount of the contribution;
• With regard to legal persons – the amount of the contribution is less than both the net value of the capital, defined as the difference between assets and liabilities on the balance sheet, and their available cash in bank accounts.

The origin of the funds with which the capital contributions were made must be clear and legal.

To be registered in the Financial Institutions’ Register, a company that is not newly established must have both paid-in and equity capital, the amount of each of which is not less than the minimum required.

The registered financial institution is obliged to maintain equity at all times in the amount of the minimum required capital.

Equity is the sum of the registered and paid-in capital, the company’s reserves formed in accordance with s. 246 of the Commerce Act, the retained earnings for previous years and the current profit for the respective reporting period, the amount being reduced by the loss from previous years and the current loss for the respective reporting period. In the presence of repurchased shares/units, the company’s equity is reduced by the amount of the repurchased shares/units.

Requirements for Managers of a Financial Institution

A person who manages and represents a financial institution, including by virtue of authorisation, should meet the following requirements:

• Higher education (university degree);
• At least 3 years of experience in the field of economics, law, finance, informatics;
• Has not been convicted of an intentional crime of a general nature, unless rehabilitated;
• Has not been a member of a management or control body or an unlimited partner in a company in the last 2 years when it was dissolved due to bankruptcy, if there were unsatisfied creditors;
• Is not deprived of the right to hold a materially responsible position;
• Not included in the list under s. 5(1) of the Measures against the Financing of Terrorism Act;
• There are no circumstances that cast doubt on his qualifications, professional experience and reputation.

Requirements for persons with qualifying holdings and beneficial owners

A person who directly or indirectly holds a qualifying holding in the capital of a financial institution, as well as a beneficial owner, must meet the following requirements:

• Has not been convicted of an intentional crime of a general nature, unless rehabilitated;
•  Has not been a member of a management or control body or an unlimited partner in a company in the last 2 years when it was dissolved due to bankruptcy, if there were unsatisfied creditors;
• Is not deprived of the right to hold a materially responsible position;
• It is not included in the list under s. 5(1) of the Measures against the Financing of Terrorism Act;
• There are no circumstances that cast doubt on its reliability, financial stability and reputation.

The requirements also apply to persons who, by law, represent legal entities holding directly or indirectly a qualifying holding in the capital of a financial institution.

Internal rules and anti-money laundering policies

The financial institution is obliged to adopt and implement internal rules for managing its activities, which include:

• Clear organisational structure and distribution of responsibilities;
• Effective procedures for organisation and management by type of activity;
• Appropriate internal control mechanisms, including reliable and effective administrative and accounting procedures;
• Internal rules on measures against money laundering and terrorist financing.

BNB Reporting Obligations for Financial Institutions

The financial institutions prepare and submit quarterly and annual financial reports to the BNB in a form and content specified by the BNB, by the 20th of the month following the reporting period.

The financial institutions, which are subject to mandatory independent financial audit, submit upon request by the BNB an annual financial report, annual activity report, annual consolidated financial report and annual consolidated activity report, prepared in accordance with the Accounting Act.

The financial institutions store for at least 5 years all accounting and other information and documents regarding their activities, including under concluded contracts. The period for storing documents related to concluded contracts runs from the date of termination of relations under these contracts.

Legal support for financial institutions in Bulgaria

The law defines the activities a financial institution may carry out and sets specific organisational requirements for companies that wish to provide financial services, including a minimum share capital and a prescribed company form. Once registered, a financial institution must also meet ongoing reporting obligations to the BNB. For these reasons, working with an experienced legal professional is essential, both to guide you through registration and to support ongoing compliance. The NBLO team is here to help.

For the documents the BNB requires with the application, see our guide on how to register a financial institution in Bulgaria.

Frequently asked questions

When must a company register as a financial institution in Bulgaria?

A company must be entered in the BNB Financial Institutions’ Register when activities such as financial leasing, guarantee transactions, factoring or granting loans with funds not raised through public attraction of deposits are material to it. That means they make up at least 30 per cent of its total activity, based on its financial statements.

What is the minimum capital for a financial institution in Bulgaria?

The minimum required paid-in capital is €511,292. Contributions must be made in cash, with own funds of clear and legal origin, and equity must stay at or above this amount at all times.

Which legal forms can a financial institution take in Bulgaria?

A limited liability company, a joint-stock company or a limited partnership with shares, registered in the Republic of Bulgaria. A joint-stock company may only have registered shares.

What are the requirements for managers of a financial institution?

Managers and representatives need a university degree and at least 3 years of experience in economics, law, finance or informatics. They must also have no conviction for an intentional crime of a general nature, unless rehabilitated, and no circumstances that cast doubt on their qualifications, experience or reputation.

What must a financial institution report to the BNB?

Quarterly and annual financial reports, filed by the 20th of the month following each reporting period. It must also keep accounting and other documents on its activities for at least 5 years.