Bulgaria’s Covered Bonds Act – Tsvetkova Bebov & Partners as Consultants

June 17, 2022

On 29 March 2022, the new Bulgarian Covered Bonds Act was promulgated in the country’s State Gazette, launching a new era in covered bonds regulation in Bulgaria.

The Covered Bonds Act transposes the EU’s Covered Bonds Directive (EU) 2019/2162 and was prepared as part of a legislative project initiated by the Bulgarian Ministry of Finance (MoF) supported by technical assistance from the European Bank for Reconstruction and Development (EBRD).

The new Covered Bonds Act will replace Bulgaria’s Mortgage Bonds Act and is expected to establish a comprehensive legal framework for the issuance of covered bonds and their supervision by the Bulgarian National Bank (BNB), which follows best international practice and applicable EU law.

Key elements of the new legislation include requirements on cover pool composition, creation of security interest, coverage and liquidity, as well as on the separation and administration of cover pools in the case of bankruptcy or resolution of the issuing bank. The Act also lays out dedicated rules on the use of cover pool derivatives and extendable maturity structures, on cover pool monitors, as well as facilitates the issuance of jointly funded covered bonds and cross-border issuances by Bulgarian banks.

Most provisions of the Covered Bonds Act will enter into force on 8 July 2022 and will be complemented by technical level implementing acts to be adopted by the BNB.

Alongside EBRD and MoF, the project involved Richard Kemmish Consulting, for the international consultancy part, and Tsvetkova Bebov & Partners (TBP), for the Bulgarian local legal consultancy part.

TBP was in charge of drafting the law in particular, in coordination with the MoF and the other stakeholders, and of assisting where necessary the MoF’s team through the completion of the parliamentary procedures.

TBP’s core team working on the project consisted of managing partner Nikolay Bebov, partner Damyan Leshev, and senior associate Petar Ivanov, who were assisted by counsel Maria Karacholova, former associate Kristina Dimitrova, Prof. Dr. Angel Kalaidjiev, a renowned academician (as external expert), and experienced banking specialist Ms. Svetlana Koeva (as external expert).