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Bulgaria: Development of Legal and Regulatory Frameworks for Covered Bonds


Bulgaria, 06 November 2019

Project Description:

This technical cooperation (TC) project is taking place within the European Bank for Reconstruction and Development ("EBRD" or the "Bank") Team on Local Currency and Capital Markets Development (LC2). LC2 aims to identify and support sequenced reforms and policies in EBRD's CoOs that contribute to local currency and capital markets development. One of the ways through which the Bank supports this role is by providing assistance to developing, based on the best international practices, a favourable legal and regulatory environment for capital market related activities, including bond issuance. This includes producing diagnostic assessments on the viability of various capital market instruments, including covered bonds.

The EBRD is seeking to appoint a Local Legal Counsel to develop the legal and regulatory framework for the issuance of covered bonds in Bulgaria. This Technical Assistance Project, provided by EBRD to the Bulgarian Ministry of Finance (the "MoF"), is focusing on updating the existing legal and regulatory framework to align it with international standards and the EU Covered Bond Framework.

Currently, the legal basis for covered bond issuance in Bulgaria is provided for in the Mortgage-backed Bonds Law. Since its adoption in 2000, 29 mortgage bonds were issued in Bulgaria by 11 banks for a total issuance volume of about EUR 270 million. However, since 2014 no new covered bonds have been issued, including due to strong banking system liquidity. In light of the recently adopted EU Covered Bond Framework that requires the transposition of the EU Covered Bonds Directive by October 2020, and with the aim of re-starting the local covered bonds market, it is considered necessary to review and amend, where needed, the existing legal and regulatory framework and to propose to introduce new legislative solutions, based on the best practices, in order to facilitate the creation and development of an effective and efficient covered bond market in Bulgaria.

Assignment Description:

In order to align Bulgaria's legislation with the recently adopted EU Covered Bond Framework and to help to create a new and more conducive legislation and environment for covered bond issuance in Bulgaria, EBRD is seeking the services of a Local Legal Counsel, to work in conjunction with an international consultant whose tasks are defined in separate Terms of Reference. The Local Legal Counsel should have a strong background in securities/capital markets law and Bulgaria's legal and regulatory framework with special focus on debt capital markets, preferably including covered bonds. Familiarity with covered bond issuance procedures and regulations in both Bulgarian and European markets and experience in policy dialogue with authorities (including Bulgarian National Bank, government ministries, regulators) and market participants is required.

The objectives of the assignment for the Local Legal Counsel, working in conjunction with the international consultant, are to:

  • identify, after consultation with market participants and regulators, any existing or potential impediments to covered bond issuance under current laws and regulations as well as market best practices;

  • where impediments exist, design a blueprint or action plan, that identifies the best way to address them through legal reform, supplementary regulations, market initiatives or other international best practices;

  • propose legal changes and/or new legislative solutions, based on the best practices and in line with the European Covered Bond Framework which will ensure the creation and developments of an effective and efficient covered bond market in the country;

  • ensure that the proposed legal reform is aligned with international best practice and enables the transposition of the EU Covered Bonds Directive, and the direct application of the revisions to the EU Capital Requirements Regulation pertaining to covered bonds, into Bulgarian law;

  • support the EBRD in policy dialogue with the Bulgarian National Bank and other stakeholders, particularly in the technical aspect of primary and secondary regulations pertaining to covered bonds.

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