Bulgarian Banks will have to undergo stress tests as part of a comprehensive assessment of the banking system. By Borislav Hitov, Head of GSS Bulgaria
The Bulgarian National Bank (BNB) announced it has started to work on the implementation of a stress test of the Bulgarian banks. The 2016 stress test aims at establishing the banks’ ability to absorb unexpected losses stemming from prolonged adverse shocks and shall also take into consideration the findings from the AQR that was announced earlier in 2016.
BNB has also announced guidelines to be followed during the stress test. They say that the stress test shall be conducted in two stages:
- Stage 1 – Apply stress test hypotheses using data reported as of 2015 end; deadline: 31 May 2016
- Stage 2 – Incorporate the AQR findings, with input data confirmed by the AQR service providers; deadline: 29 July 2016
The stress test is pursuant to the Law on Recovery and Resolution of Credit Institutions and Investment Firms (in force as of 14 August 2015) which provides for an asset quality review (AQR) within 12 months of the law’s enactment, followed by a stress test of the banking system.