The challenges facing the FSC are the fintech industry and the adoption of the euro
Boyko Atanasov– Chair of the Financial Supervision Commission
On March 15, 2019, Boyko Atanasov was elected as Chair of the Financial Supervision Commission by the 44th National Assembly of the Republic of Bulgaria.
Mr. Boyko Atanasov was the Deputy Chair of the Financial Supervision Commission, Head of the Investment Supervision Department for the period 2017-2019. He has more than 20 years of professional experience in the revenue administration system – from 2013 to 2017 he was the executive director of the National Revenue Agency.
Mr. Atanasov graduated from the University of National and World Economy, majoring in Planning and Forecasting of Economic Systems and has a number of economic specializations in Bulgaria and abroad.
Mr. Atanasov, what „are“ the trends for the development of the non-banking sector in 2023?
In the context of the post-pandemic period, global digitization, the European Green Deal and the preparation of the financial sector for entry into the euro area the Financial Supervision Commission continues to work for sustainable stability of the insurance market in Bulgaria, to introduce innovations in the regulation of the capital market, as well as and for absolute strictness and complete transparency of the actions and processes of the pension insurance market.
- Capital markets
The non-banking financial sector, part of which is the capital market, is an alternative for financing business activities, complementing the opportunities offered by the banking sector. Undoubtedly, one of the most dynamic and rapidly developing sectors of the capital market is the sector of investment funds.
The development of the mutual funds market is essential for both private and corporate investors seeking higher returns. A positive development trend is also emerging in relation to alternative investment funds as a form of collective investment. In recent years, there has been a steady increase in interest in this relatively new subject of the Bulgarian capital market, but with huge opportunities for progress. This type of financing complements bank financing, while alternative investment funds can offer financing for riskier activities. A significant part of them in Bulgaria direct their investment strategies to micro, small and medium-sized enterprises in the form of equity investments and the provision of convertible loans.
I can say that there are increasingly high expectations regarding this significant segment of the fund industry, carrying a huge potential for development and giving requests to become an important factor in the capital market.
- Insurance market
Many of the processes in insurance have already been digitized, including underwriting policies, filing claims, intermediary accountability. Digitization in the field of insurance will continue in the coming years, with the ultimate goal being to offer all products online. Sales through electronic channels will remain stable in both general and life insurance. Digitization will lead to even more personalized products where individuals will compile the risks themselves depending on their individual needs.
It is my view that the question of capital adequacy of insurers will continue to be a leading one in terms of supervision. All of them will have to implement the requirements of IFRS-17, which will present them with new challenges – to reorganize their operations and their systems so as to generate the information and data they need to implement the requirements of the standard.
We are witnessing all the preconditions that in the coming years the insurance market will continue to develop with new products related to both cyber risks that need insurance coverage and products concerning the impact of the climate on various activities and especially on agriculture.
- Social insurance market
The regulatory policy carried out by the FSC regarding the activity of supplementary pension insurance is already 20 years old, and the sector has undergone remarkable development, especially in the last three years. Currently, the investment portfolios of the pension funds are well structured and highly diversified, with adequate reserves to guarantee the payment of lifetime pensions. The assets of the pension funds are subject to daily inspection by the Financial Supervision Commission, in its capacity as a specialized supervisory body. I can say that the activity of supplementary pension insurance is one of the most strictly regulated in our economy.
Just a few days ago, a change in the Social Security Code was passed by the parliamentary social committee, which will allow Bulgaria to introduce the so-called Pan-European Pension Product , which is commonly called a “European pension”. Through this product, Bulgarian citizens will have the opportunity to voluntarily provide for an additional pension within the EU, even if they change their residence from country to country, without administrative or financial inconveniences. They will also have access to many more pension products developed by European companies and will be able to choose higher-yielding but riskier or more conservative schemes. In this way, funds from other countries in the European Union will be able to operate on the Bulgarian market and pay additional pensions to people who are voluntarily insured in them as part of the third insurance pillar.
What are the strategic goals that the Commission sets for itself?
The FSC has entered a new strategic period covering the period from 2022 to 2024. The regulator’s development strategy includes a clearly defined long-term development vision supported by a strong expert team and maximum deployment of digitization processes in the non-banking sector. All this will be accompanied by constructive dialogue with all stakeholders in the processes regulated by the FSC. An important part of the development of the Bulgarian capital, insurance and social insurance market is the active and effective discussion with businesses in the direction of developing concepts and sustainable strategies. Our goal is to be predictable in our actions and to show objectivity when making decisions on which the development of Bulgaria depends.
In order to achieve results in accordance with the set development strategy, the Financial Supervision Commission has passed and will continue its course through specific steps such as the development of financial literacy of users of financial services and investors, increasing the scope of the communication process by conducting regular meetings with FinTech companies to discuss minimal risks and maximum benefits from technologies, promoting the development of start-up companies by activating the capabilities of the Innovative Hub, as well as adapting the new regulatory framework for crowdfunding. Together with the participants in the non-banking financial sector, we create a sustainable and innovation-friendly business environment, with an emphasis on the need for a partnership between the national regulator and business.
The already functioning Innovation Hub provides a single point of contact for interaction between us as a supervisory authority and the respective FinTech companies. Thanks to the introduced digital innovation, persons supervised by the Financial Supervision Commission and FinTech companies can count on assistance when they need clarification on the regulations or when applying for a permit for their activities.
Can we talk about digitization of the non-banking financial sector and what is the role of the FSC?
Technological advances already offer the financial sector tremendous opportunities to meet growing customer needs and regulatory requirements. Increasingly, staying competitive will mean that financial market participants stay abreast of the latest developments in fintech so that companies can ensure they are taking advantage of the best possible technology solutions.
I believe that we, as a regulatory and supervisory body of the insurance, investment and social insurance market, are already and will be observers of the innovation implementation process in order to know in detail how they work and are implemented. The goal is to ensure adequate evaluation of new product and business models. We also have a responsibility to balance the risks of innovations against the benefits to consumers; we also need to find the balance between encouraging innovation and protecting customers from potential downsides.
We will need to assess and where appropriate, adjust the regulatory framework, especially on the part of market behavior, in order to adequately deal with changing risks and business models. We also face the task of having the capacity to be able to react and supervise FinTech solutions in the future.
Last but not least, the Commission is already working on its digital transformation project to meet the needs of supervised persons so that all administrative services can take place in a digital environment. The result will be time saved for businesses and citizens. According to a report by the International Monetary Fund (IMF), for example, the level of development of e-government correlates with the level of foreign direct investment. The easier it is to do business in a country, the more companies want to invest in it. We hope that, as cause and effect, this will also stimulate the entry of new participants in the capital markets.
In response to the changing environment, the Commission is using also social networks as additional communication channels to meet the new challenges of its goal of financially literate consumers of financial services. At the end of 2021, our digital campaign #invest safely was launched. In 2022, we renewed the design and content of the website of the Financial Supervision Commission, and in a few days we will present the institution’s mobile application – FSC Mobile. With it, users will have access to the Commission’s database of licensed investment firms, insurers and pension insurance companies, they will be able to check in real time the status of the digital complaint they have submitted, contact us directly, and view important dates from the supervisiom calendar.
What are the challenges you expect to face in the upcoming year?
The Financial Supervision Commission faces several main topics in the current and coming period: the development of the fintech industry and the crypto asset market, the adoption of the euro as the national currency, as well as the active protection of consumers. The FCS is a major participant in the process of creating the National Plan for the Introduction of the Euro in Bulgaria. The Commission’s vision for this key process for the Bulgarian economy includes the systematization of the necessary measures and actions in connection with the conversion of financial instruments. We intend to carry out the necessary monitoring of the expected stages for the adaptation of the clearing and settlement systems to work with the euro.
And most importantly for me, the Financial Supervision Commission remains fully focused on its main priorities: to protect consumers of financial services, to maintain the stability of the non-banking financial sector and to promote the development of the insurance, investment and social insurance sectors.