Financial license Bulgaria – regulation of financial institutions

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Financial license in Bulgaria can be obtained quickly and at quite reasonable costs. Bulgarian financial institutions are governed by the Credit Institutions Act and in accordance with its Art. 3, a financial institution is a legal entity different from a credit institution or an investment intermediary. Main activity of licensed financial institutions in Bulgaria is performing one or more of the following:

  1. Providing payment services under the Payment Services and Payment Systems Act;
  2. Issuing and administering other means of payment (travellers checks and letters of credit) as far as this activity is not covered by item 1;
  3. Financial leasing;
  4. Guarantee transactions;
  5. Trading on your own account or for account of customers in foreign currencies and precious metals with the exception of derivative financial instruments on foreign currency and precious metals;
  6. Provision of services and / or activities under Art. 5 para. 2 and 3 of Markets in Financial Instruments Directive;
  7. Currency brokerage;
  8. Acquisition of credit claims and other forms of financing (factoring, forfeiting, etc.);
  9. Issuing electronic money;
  10. Acquisition of shares in a credit institution or other financial institution;
  11. Lending funds, that are not raised through public deposits or other repayable funds.

Financial institutions are subject to registration with BNB (Bulgarian National Bank) public register. A very important detail in this regard is that if there is a specific activity under a special law – the arrangements for licensing a Bulgarian financial institution are different. For example, a financial institution that issues electronic money should be registered and licensed under the Payment Services and Payment Systems Act.

The Credit Institutions Act sets out the following common requirements for the applicants:

  1. To have a commercial registration in the Republic of Bulgaria as a limited liability company, joint stock company or a limited partnership with shares;
  2. The scope of activity of the company shall not include services / activities different from those listed above;
  3. Company’s own capital shall be in structure and in the amounts determined by Ordinance No 26 of 23.04.2009 for financial institutions, whereas only registered shares are allowed;
  4. Main business activity shall be conducted on the territory of Republic of Bulgaria;
  5. Managers and representatives of the company shall have the necessary qualification, experience and reputation, and the people who directly or indirectly hold the majority of the shares shall match certain criteria for reliability, financial stability and good reputation.

There are certain requirements to the person managing or representing a financial institution licensed in Bulgaria as well as to the individuals directly or indirectly holding more than 10% of the capital of a financial institution. Any such person shall:

  1. Have a higher education;
  2. Have at least 3 years of experience in economics, law, finance, IT;
  3. Have not been convicted of a crime of general nature, unless rehabilitated;
  4. For the last two years have not been a member of a management or supervisory body or a general partner in a company terminated due to bankruptcy in case unsatisfied creditors are left;
  5. Have not been deprived from the right to hold responsible positions;
  6. Have not been included in the list under art. 5 para. 1 of the Law on Measures Against Financing of Terrorism.

For registration and enlistment of a financial institution in the National Bank Register the capital of the company should be paid (in the form of cash contributions) in amount of BGN 1 000 000 (one million). The contributions to the minimum required capital must be paid in cash and should have been effected with own funds.

The administrative fee for processing the application and registration of financial institution and its entry in the register of the National Bank is BGN 3000 (three thousand).

Recent amendments to the Credit Institutions Act resulted in significant changes to the financial institutions regime. According to the latest changes in a six month period all financial institutions (including the so-called Financial Houses) enlisted in the register of Bulgarian National Bank, which trade with specific market instruments (checks, bills, certificates of deposit, etc.)., foreign exchange and precious metals, financial futures options, instruments related to foreign exchange rates and interest rates, and other derivative instruments have two options:

  1. If they intend to provide investment and / or perform investment activities under Art. 5, para. 2 of the of the Markets in Financial Instruments Act (these are services that can be provided only by licensed investment intermediaries) must submit to the Financial Supervision Commission documents to obtain a license to carry on business as investment intermediaries within the Markets in Financial Instruments Act. This mandatory re-registration of financial institutions (financial houses) is actually a form of new licensing of a legal entity under another law at different although similar requirements.
  2. If they have carried and intend to carry out only foreign exchange they need to comply with the new provisions in accordance with Bulgarian Currency Law.

In connection with the above in that six-month period all financial institutions, registered before the recent legislative changes, must return their certificates of registration and re-register in accordance with the procedure as per Decree No. 26 of 23.04.2009 for financial institutions with the BNB if they meet the requirements of Art. 3a. In case a company fails to re-register within the given period, BNB deletes the registered company from the registry either at the request of the legal entity itself or if BNB determines that the company:

  1. No longer meets the requirements stated in this Article;
  2. The registration has been made on the basis of false information or false documents;
  3. Does not fulfil its obligations under this Act or its implementing acts, or other statutory requirements for the activity.

 

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