Bulgaria is nearing the home stretch of its Eurozone integration and OECD accession plans, according to CMS Partner Elitsa Ivanova, with renewables, ESG, fintech, and digitalization the hot topics for lawyers and bankers alike.
“Currently, we're heavily engaged in transactional work, particularly in the renewable energy sector,” Ivanova begins. “This momentum is extending into banking and financing, making renewables a key focus of our practice. Projects that started developments a while ago are now looking for financing, and the surge in project financing within renewables is notable, with an expectation for continued growth,” she explains.
Moving to the connected area of ESG, Ivanova says “ESG is more than a trend; it's becoming a fundamental aspect of deals, especially for regional banks.” Last year, CMS executed a major deal with a sustainability component, she points out: “Going forward, larger projects and syndicated deals with international institutions will need to adhere to sustainability goals, contributing to net-zero and carbon targets for banks and IFIs, as well as their clients.”
In terms of politics, two targets are on everyone’s agenda, Ivanova says: Eurozone integration and OECD accession. “Preparing Bulgaria for the Eurozone involves legislative changes and rigorous upgrades across institutions,” she explains. “While we meet most convergence criteria, inflation remains a challenge. Banks and state entities are aligning policies and systems for the January 2025 (prospective) deadline – so there is a concerted effort towards that goal.”
The hitch? According to Ivanova, “Bulgaria’s been placed on an increased monitoring list by the Financial Action Task Force – so they’ve seen some deficiencies that need to be addressed. We have a plan and a proactive approach to solving those issues, hopefully in time for a new monitoring report that’s coming up shortly.” Separately, the OECD accession push is a strategic move to enhance Bulgaria's profile in Europe. “Joining the OECD, along with the Eurozone accession, aims to elevate Bulgaria's standing, improve its country ratings, and burnish its business credentials for EU and foreign business partners,” she explains.
The other big topic on the banking agenda, Ivanova notes, is “embracing digitalization, while aligning with the EU agenda. Fintech, regtech, crypto, AI, and data commoditization are focal points.” Specifically, she mentions that “fintech is booming and regtech is catching up. The banking sector in general in Bulgaria has recognized the need to embrace innovation to stay competitive. And we’ve recently heard industry pledges – in addition to the digital transformation of banks – for also putting digital skills on the agenda: educating the public at large about the benefits and the risks connected to digital financial services.”
Ivanova then highlights the ongoing “banking consolidation trend, with some large acquisitions and mergers in the past couple of years.” The central bank is unlikely to issue any new licenses. In that context, she explains: “We have some large banks but also a number of smaller outfits – some, primarily license holders. So, investors might be looking into acquiring those small outfits to enter the market and grow from there. And the established players are looking to keep up and maintain their market share – opening the door for bolt-on acquisitions.”
Finally, Ivanova notes a significant course correction on Bulgaria’s NPL and credit servicing legislation. “There's a notable effort to revamp legislation on credit servicers and credit buyers. The aim is to modernize and bring consistency to an area that has been underregulated. This includes new NPL legislation with stricter requirements for credit servicers and buyers, addressing long-overdue regulatory gaps.”
