The challenges facing the FSC are the fintech industry and the adoption of the euro

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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.

On October 21, Mr. Boyko Atanasov – Chair of the Financial Supervision Commission (FSC) opened the 20th edition of the educational program for students “The non-banking financial sector in Bulgaria”. The traditional initiative is organized in partnership with the Ministry of Education and Science (MES) and the Atanas Burov Foundation. In the anniversary edition of the event, 22 students from vocational schools with an economic and financial profile from the cities of Blagoevgrad, Gorna Oryahovitsa, Varna, Kyustendil, Plovdiv, Sofia, Burgas, Stara Zagora, Veliko Tarnovo, Shumen, Gotse Delchev, Sliven, Smolyan will take part. , Montana, Silistra, Petrich, Kardzhali, Ruse, Varna, Yambol and Dryanovo.

The educational program is unique in Bulgaria. In its anniversary edition, it presents a balanced content between online-based presentations and virtual interactions, dedicated to the pension insurance, insurance and capital market, with speakers – FSC experts and business representatives.

“I am honored to launch the 20th anniversary edition of the program, the focus of which is to increase the financial literacy of society. The sustainability of the program, its 20-year history, speaks of consistency, of commitment and, above all, of our responsibility to the generation that grows and is educated in the challenging environment of digitization and innovation.” shared Mr. Atanasov.

During the training, students and their teachers will learn about the three-pillar model of pension insurance, the development of the insurance market in Bulgaria, the mechanisms for consumer protection, the types of insurance and insurance supervision. The capital market and stock exchange trading are also part of the program during which the topic of the digital field of safe investing is presented, as well as the ways in which investors are protected.

To make the content even richer and more comprehensive, in sync with the latest trends in the non-banking financial sector, in 2022, lectures on fintech business models, prevention of money laundering and terrorist financing, the “green deal”, cyber security and cryptocurrencies and more.

“I believe that the shared experience of the experts with whom you will work will help you to be more responsible for your finances, to be drivers of change, but above all with the awareness of financial culture, to have the confidence and courage to pursue your dreams you are.” said  Mr. Boyko Atanasov in his address to the participants.

The program continues until the middle of November, when all students will receive a certificate for their participation in the educational initiative.

On October 5, 2022, in the presence of officials and guests, an anniversary conference was held on the occasion of 140 years since the beginning of insurance in Bulgaria and 30 years since the establishment of the Association of Bulgarian Insurers (ABI). The prestigious event is organized by ABI, a long-standing partner of the Financial Supervision Commission (FSC).

The conference was opened by Mr. Konstantin Velev – Chair of the Board of ABI, Mrs. Daniela Dobreva – Deputy Minister of Finance and Mr. Boyko Atanasov – Chair of the Financial Supervision Commission. Leading figures of European insurance were also present – Mrs. Petra Hielkema, President of the European Insurance and Occupational Pensions Authority (EIOPA), Michaela Köhler – Director General of the European Federation of Insurers Insurance Europe and Didier Millero – Head of the Insurance and pension insurance Sector in the Directorate General “Financial Stability, Financial Services and Capital Markets Union” of the European Commission.

Mr. Velev set the highlights of the conference – regulations, competitiveness and the growing climatic, demographic and digital risks of the modern age, as well as the search for appropriate protection against them.

In her speech, the Deputy Minister of Finance – Ms. Daniela Dobreva emphasized the successful partnership of the Ministry of Finance with the FSC and the ABI, as “the goal is to increase the protection of users of insurance services, guarantee financial stability and preserve the competitiveness of Bulgarian insurers”.

The Chair of the FCS – Mr. Boyko Atanasov welcomed the participants and shared that “the role of the Association of Bulgarian Insurers is to be a pillar of security, a balancer for diplomacy, a visionary for conquering new horizons. I believe that the words that best describe our joint work with the insurance sector in Bulgaria are dialogue, technological orientation and cause”.

The Financial Supervision Commission will continue to support the insurance industry and work to achieve a smooth implementation of the new regulations affecting this sector in the country. As of the first half of the year, it represented 3.9% of GDP calculated on the basis of gross premium income (insurance penetration), and 8.2% calculated on the basis of insurers’ assets (2021 data). For the first six months of 2022, Bulgarian insurers realized gross premium income in the amount of BGN 1.7 billion, taking into account an increase in written premiums of 11%, and for the same period benefits were paid in a total amount of BGN 684 million , with the same growing by 10% on an annual basis.

The cited data are an indicator of a stable insurance market, which is a prerequisite for a higher level of competitiveness and at the same time for maintaining confidence in it. Innovation is about to be created and introduced, with the potential to position insurance companies and their customers at another level.

During the conference, Mr. Vladimir Savov, Deputy Chair of the FSC, Head of the Insurance Supervision Department, took part in the discussion part of the panel “Insurance Market: Regulations and Competitiveness – in Search of the Balance”. Topics fundamental to insurance were discussed and effective policies were outlined to stimulate the development of the sector, with all the resulting benefits for the economy and society.

Nearly 200 students participated in the initiative of the Financial Supervisory Commission “The Super Power of the Young Investor”, dedicated to risk prevention in the use of investment products in the financial markets. With the initiative, the Financial Supervision Commission aims to establish both good partnership relations with schools and to contribute to increasing the financial literacy of high school students, some of whom have a targeted interest in the field of capital markets and future investors.

The first to participate in the pilot events were the teenagers from the 11th and 12th grades of the National Financial and Business School, the National Commercial and Banking School and the National Natural Science and Mathematics School.

Students were introduced to basic concepts from the world of investments, new technologies and integrated financial solutions. How the Bulgarian stock exchange functions, what is hidden behind the abbreviations DLT and NTF, what are Bitcoin, cryptocurrencies, quantum computers, what are the risks and how to react when they are established, are only some of the topics that were discussed with interest together with the teachers and their high school students.

“The Financial Supervision Commission is an institution directly involved in the process of increasing the financial literacy of society, especially young people. In our role as a regulator who creates conditions for security and stability in financial markets, this remains one of our strategic priorities, along with protecting consumers and strengthening public confidence in the capital market. By gradually starting to prepare teenagers for their encounter with the digital financial reality and innovation in the field of investments, we create the basis for this trust”, shared Boyko Atanasov – Chair of the Financial Supervision Commission.

The “Superpower of the young investor” will continue to happen, covering all schools that have expressed their interest in joining the initiative.

The Financial Supervision Commission – with a commitment to stable results in a time of digitalization, green investments and regulatory changes

  In the context of the post-Covid pandemic, global digitization, the European Green Deal, the hostilities in Ukraine and on the threshold of the euro area the Financial Supervision Commission continues to work for stability of the insurance market in Bulgaria, to introduce innovations in the regulation of the capital market, as well as ensure absolute strictness and complete transparency of the actions and processes of the pension insurance market.
The development trend of the capital market is headed towards digitization and creation of conditions for more participants and reduced administrative burden. The positive relationship between innovation and financial technology has already reshaped standard consumer behavior and thinking, and this process has led to new opportunities for realizing optimized business models. At the same time, we, the participants in the financial sector, have the task of analyzing and forecasting potential risks. It is in this direction that the FSC focuses its activity on the balance between the promotion of innovation on the part of companies for investment purposes and the protection of consumers from the negative aspects that the new online space implies.
In order to achieve results with the set development strategy, the Financial Supervision Commission has passed through specific steps such as the development of financial literacy of users of financial services and investors, improving 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.
Dynamics in the development of technologies and digitization have a key role in changing consumer attitudes and growth expectations. The role of the FSC is to provoke the sync between the regulatory requirements and their implementation in a digital environment, with the ultimate goal being to reduce the administrative burden. Part of the specific results are the functioning Innovation Hub, providing a single point of contact with FinTech companies and the changed regulations for access to the capital markets of small and medium-sized enterprises. The FSC mobile application, building a unified information system for submitting and receiving information from supervised persons in an electronic standardized format is also in progress.
An interesting moment in the current situation is that, within the framework of integrating innovations to reduce the administrative burden, the European Commission presented a Proposal for a Regulation of the European Parliament and the Council establishing a European single access point (ESAP). Its purpose is to provide the public with centralized access to all necessary information relevant to financial services. The European single access point will give investors easy, fast and comparable access to data on European companies, thereby also facilitating access to financing for European companies. ESAP is expected to contribute to the further integration of financial services and capital markets in the EU single market and to promote the development of smaller national capital markets and economies by providing greater visibility to them.  The Financial Supervision Commission, in sync with the European Commission, introduces measures to implement the new regulations and creates conditions for the realization of the vision of a European single access point.
Certainly one of the extremely meaningful and cause-oriented topics is that of the “Green Deal”. Ecology, social responsibility and transparent management are already part of the worldview and way of thinking of institutions and regulators in Europe. In accordance with the objectives of the European Union, the Financial Supervision Commission in Bulgaria supports through specific actions the targeting of national and European funding towards a sustainable economy, the planning of tools for business recovery after crises, as well as the balanced regional development of the country. I believe, and I see the specific results, that the Bulgarian regulator in the non-banking sector strategically arranges its actions in support of achieving the goals of the “Green Deal”. In this line of thinking, we all as a society are tasked with turning our attention to renewable energy, energy efficiency, green buildings, clean transportation, products created by the circular economy. After the adoption of the European Green Deal, the focus of the FSC will be on financial risks for institutions and the financial system, as well as on sustainability risk (ESG risks).
When we talk about achieving sustainable goals, examples are always important. Green bonds are a suitable financial instrument for large-scale sustainability projects, by giving access to a robust financing tool for green projects compliant with the EU taxonomy. On the other hand, investors in such bonds will be able to more easily assess and compare the sustainability of their investments, which will reduce risks and strengthen their confidence in the market. The new EUGBS voluntary standard will be open to all EU and non-EU issuers, including corporations, financial institutions and issuers of covered bonds and asset-backed securities, as well as governments and other public bodies.
In this regard, the challenges to the FSC to exercise its supervisory powers over capital market participants in compliance with the requirements laid down in the legislative package for Sustainable finance, namely the Disclosures Regulation, the Climate and Sustainable Finance Benchmarks Regulation and the Taxonomy Regulation.
The FSC is also a major participant in the process of creating the National Plan for the Introduction of the Euro in Bulgaria. The FSC’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.
In the context of the complicated international situation caused by the war in Ukraine and the sanctions and restrictions imposed by the EU, USA, Canada, the UK against the Russian Federation, the Russian Central Bank, credit institutions and companies, as well as individuals, the Commission took timely measures such as issued recommendations and guidelines to the investment, insurance and insurance sector for increased caution and the implementation of a strengthened risk management policy before proceeding with investments in financial instruments issued by issuers related to the Russian Federation.
The challenges we face provoke us to be vigilant, focused on achieving the set goals of increasing consumer protection, as well as promoting investors, of a stable, regulated and transparent non-banking sector.
Amid this global transformation, the FSC is starting a new strategic period for 2022 – 2024. The change for the regulator includes long-term planning, a strong expert team and determination to implement innovation in the field of digitization and regulations to stimulate the capital market. 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 communication 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.

Mr. Boyko Atanasov, Chair of the Financial Supervision Commission, presented some of the results achieved by the FSC for the period 2019-2022, as well as important highlights of the adopted Development Strategy of the FSC for the period 2022-2024. The presentation today was within the framework of a round table on the topic “Strategic Management and Regulation of Business Processes in the State”, organized by the Higher School of Insurance and Finance (VUZF) and its Laboratory for Academic and Applied Research.
The Chair of the FSC presented to the audience some of the results achieved for the last three-year period. 2019 – 2022, on the one hand, is the time frame of the FSC Strategy for the specified period, and on the other hand, this period also coincides with the election of Boyko Atanasov for the position of Chair of the Commission.
“For the three-year period, we managed to ensure stability of the insurance market, we introduced innovations in the regulations of the capital market and strengthened the pension-insurance market to the extent of exceptional rigor and full transparency. All this happened in sync with the development of the organization – digitization, optimized processes and at the same time improvement of the team of high-level experts of the FSC. We worked with public visibility for every single innovation or sanction we made.”

Mr. Atanasov briefly presented the new Strategy for the development of the FSC for the period 2022-2024 as a basic and important tool for achieving the set goals and expected results. “The facts about the results achieved so far, presented in the report for the previous period, presented on the official page of the FSC, show that the Strategy of the FSC is well formulated and the main priorities and set sub-goals are being implemented. The strategy of the FSC for the upcoming period is aimed at several main priorities, with the ultimate goals being the reduction of  administrative burden, flexibility and adaptability to the business environment, and optimization of processes through digitization.”
During the round table discussions, he also announced the upcoming presentation of the new institutional site of the FSC and the Commission’s mobile application, the purpose of which is to facilitate users in the process of obtaining information about regulations in the non-banking financial sector. Boyko Atanasov also described the functions of the Innovation Hub, providing a single point of contact with FinTech companies. It was clearly emphasized that the establishment of a unified information system for submitting and receiving information from supervised persons in an electronic standardized format is also in progress.

“We act as a referee, not a player. In detail – we aim to create conditions for equality in the criteria for access to capital markets and opportunities for fair competition between participants. When we give trust and fair treatment, we get trust and fair treatment. This should be the basic principle of functioning not only of the Commission, but also of any other state organization. The governance style should be authoritative, not authoritarian.” Mr. Boyko Atanasov also stated.

The presentation ended with an emphasis on the regulatory functions of the FSC and the resulting benefits for users of financial services, by ensuring stable and secure financial markets.
During the event, the panelists – leading representatives of state institutions and regulatory bodies, experts, representatives of the academic and scientific field, represented by the Fiscal Council, the Executive Agency for the Promotion of Small and Medium Enterprises, the Bulgarian Development Bank, Unicredit Bulbank, the Bulgarian forum of business leaders, VUZF, the Bulgarian National Bank, the Bulgarian Stock Exchange and the FSC discussed the interaction between business and the state, strategic directions and priorities, the state budget as instruments in the implementation of this policy, as well as how far the regulatory function of the state should extend.