Control in Banking Sector Lecture Notes

Vocabulary flashcards covering the legal framework, management, and supervisory mechanisms of the banking sector in Bulgaria and the European Union.

Bank (Credit Institution)

A legal entity whose business is to take deposits or other repayable funds from the public and to grant credits or other financing for its own account and at its own risk.

Financial Institution

An entity whose principal activity is conducting activities such as payment services, financial leasing, trading in foreign exchange/precious metals, factoring, or granting credits with funds not raised from receiving deposits from the public.

Primary objective of the Bulgarian National Bank

To maintain price stability as part of the European System of Central Banks ($ESCB$) in accordance with the Treaty on the Functioning of the European Union.

BNB Basic Tasks

Participating in defining/implementing Eurosystem monetary policy, conducting foreign-exchange operations, managing official foreign reserves, and promoting the smooth operation of payment systems.

BNB Independence

The principle that the BNB, Governor, and Governing Council shall not seek or take instructions from EU institutions, the Council of Ministers, or other governments when performing their duties.

Governing Council composition

A body consisting of $7$ members: the Governor of the Bank, the $3$ Deputy Governors, and $3$ other members.

BNB Main Departments

The three departments specified by Article $20$: the Issue Department, the Banking Department, and the Banking Supervision Department.

Internal Audit Unit (BNB)

A unit headed by a chief auditor appointed by the Governing Council responsible for carrying out the internal audit of the Bulgarian National Bank.

Credit Institutions Act Purpose

Lays down terms and procedures for licensing, supervision of prudential requirements, and winding up of banks to ensure a secure banking system and safeguard depositors.

Bank Management Requirements

A bank must be managed and represented jointly by not less than $2$ persons, at least one of whom must have command of the Bulgarian language.

Capital Buffers

Adequate own funds that banks must maintain at all times, with terms and conditions laid down in an ordinance of the BNB.

Single Supervisory Mechanism (SSM)

A system of banking supervision in Europe including the European Central Bank ($ECB$) and national supervisory authorities ($NCAs$) of participating countries.

Single Resolution Mechanism (SRM)

An element of the European banking union intended to ensure the efficient restructuring of troubled banks with minimal costs to taxpayers.

Criteria for Significance (ECB Supervision)

Total asset value exceeding EUR $30$ billion, important economic importance for the country/EU, or cross-border assets exceeding EUR $5$ billion with a ratio over $20\%$, or receipt of direct public financial assistance.

Joint Supervisory Teams (JSTs)

Teams established for each significant institution responsible for supervisory inspections, risk profile assessment, and ongoing supervisory activity.

Supervisory Decision

A legal act adopted by the $ECB$ that grants rights or imposes obligations on a credit institution, changing its legal situation.

Guidelines (ECB)

Legal acts addressed to national competent authorities that are binding as to the results to be achieved but allow flexibility in implementation.

Administrative Review Board

An independent internal body of the $ECB$ that conducts internal administrative reviews of supervisory decisions adopted by the $ECB$.

European Court of Auditors (ECB role)

An EU institution whose audit powers over the $ECB$ are limited to checking the effectiveness of the management of the bank.