ASSOCIATION OF BANKS IN BULGARIA /ABB/

1. ASSOCIATION OF BANKS IN BULGARIA /ABB/ Eleonora Hristoforova Legal adviser ABB Sofia, May 4, 2007

2. Overview of Bulgarian banking system • Structure • 27 banks and 5 foreign branches; • Penetration • Assets to GDP – 89 % • Population per branch – 7050 • Population per employee – 320; • Performance • RoA – 2.2% • C/I - 55.6% • RoE – 24%; • Openness • foreign ownership – 83 % market share • subsidiaries and branches of large European banking and financial groups – 77 % market share Association of Banks in Bulgaria Presentation to IBFBA

3. General information about ABB • Founded – May 9, 1992; • Membership – all banks and branches of foreign banks • 27 banks – full members • 5 bank branches – associate members • Governance • The General assembly elects the Executive Board /EB/ consisting of 7 members – bank executive directors • The EB elects a Chairman and a Vice-chairman • The EB appoints the Secretary General to run day-to-day operations. The term of the Board members is 3 years, limited to two successive terms Association of Banks in Bulgaria Presentation to IFBA

4. General information (cont.) • Mission of the ABB • Establishes links, co-operation and mutual aid among commercial banks • Coordinates the interests of its members in the realization of their activity • Protects the rights and interests of its members before state institutions, public organizations and other bodies • Promotes ethical business behavior among its members • Assists commercial banks staff in upgrading their professional qualification by organizing professional meetings, symposia, conferences • Establishes contacts, and acts as representative with foreign and international organizations • Aids the implementation of new banking techniques and technologies • others Association of Banks in Bulgaria Presentation to IFBA

5. Working structure • Committees - according to the Statute of the ABB • Payment systems committee • Capital markets committee • Legal committee • Economic policy committee • Information technology committee • Security committee • National commission on banking techniques and practices Association of Banks in Bulgaria Presentation to IFBA

6. Working structure (cont.) • Working groups - established by the EB of the ABB • on the implementation of Basel II • on the activity of custodian banks according to the Social insurance code • on the development of cash circulation • on anti-fraud measures concerning banking cards • on preventing money laundering • S.W.I.F.T. Users Association of Banks in Bulgaria Presentation to IFBA

7. Important internal documents • Statute of the Association • Last changed in April 2007 • Ethical code of the members • New code approved in 2004 by the General Meeting replacing the existing one from 1995 • Some key agreements of the ABB • Cooperation agreement with the Bulgarian Dealers’ Association and BNB on the calculation and publication of interbank interest rate indexes SOFIBOR, SOFIBID and LEONIA, first signed in 2003 • Inter-bank agreement for transparent disclosure of Annual Percentage Rate /APR/ to bank clients, applied before the adoption of the Law on Consumer Credit in 2006 Association of Banks in Bulgaria Presentation to IFBA

8. Relations with authorities and other organizations • Central bank – the BNB, major regulatory and supervisory authority of banks • long years of affirmed good cooperation with the ABB and support before other institutions • National Assembly • Legal Commission, Commission on Economic Policy, Commission on the Budget and Finance • Financial Supervision Commission – regulation and supervision of banks as investment intermediaries, custodian banks of pension funds, major shareholders of the Bulgarian Stock Exchange and the Central Depositary • enhanced commitment of banks with the business of investment funds, managing companies and other non-banking financial intermediaries • Ministry of Finance • draft laws of the BNB and the FSC, collaboration on tax laws and regulations, • Other non-governmental organisations in the financial sector – Association of insurers, Association of pension companies, Association of non-bank investment intermediaries, etc. Association of Banks in Bulgaria Presentation to IFBA

9. Relations and cooperationwith member banks • Transparency and timely dissemination of information to the members • Expert discussions of all important issues, statements and opinions of the ABB at the meetings of Committees and Working Groups at the Association • Monthly electronic information bulletin for members reviewing all the activity of the ABB in the previous month • Quarterly publication of a Press bulletin for members and partners with short articles and brief notes • Publication of a booklet – Official presentation of the ABB – annually after the General Meeting Association of Banks in Bulgaria Presentation to IFBA

10. International cooperation • Full member of the European Banking Federation, seated in Brussels – 2007, previous associated member – since 1995 • Member of the Inter Balkan Banking Forum - regional cooperation of the banking associations in the Balkan countries – 2004 • Application for membership in the European Payment Council, seated in Brussels - 2007 • Bilateral cooperation with foreign banking associations and other organisations, exp. ATTF – Luxemburg for training and education of Bulgarian bankers Association of Banks in Bulgaria Presentation to IFBA

11. Participations in local institutions and organisations • The ABB appoints representatives in the governing bodies of: • Bank Deposits Insurance Fund • Securities Investors Compensation Fund • Emergency liquidity fund of the RTGS system • Conciliation Commission for out-of-court settlement of payment disputes • The ABB, together with the BNB, is core shareholder in the International Banking Institute Ltd, involved in bank training and education Association of Banks in Bulgaria Presentation to IFBA

12. Joint stock companies of banks and the BNB for payment infrastructure and other • Bankservice – payment system for payments up to BGN 100,000, not in real time • Borika – national card operator • Joint stock company of major banks and the BNB for provision of cash services • in the course of establishment Association of Banks in Bulgaria Presentation to IFBA

13. ABB and the recent developments of the payment system in Bulgaria • National RTGS system for large value payments – since 2003 • Introduction of the Law on payments as a legal framework – 2004 – 2005 • Creation of a National Council on Payment Systems with the participation of the BNB, ABB as a representative of the banking community and the payment system operators - 2005 • IBAN standard for all bank accounts – since 2006 • SWIFT standards for messages within the national retail payment system – BISERA – since 2006 • Continuing work and consultations on further elaboration of a national SEPA plan Association of Banks in Bulgaria Presentation to IFBA

14. Meeting challenges of EU membership • Upward trends of development of the national economy • GDP growth rate above 6 per cent for the last 3 years • Inflation rate between 4 and 6.5 per cent in the period 2004-2006 • Constantly diminishing rate of unemployment since 2002, at the end of 2006 - 9.1 % • Substantial budget surplus for the last 3 years • Continuing stability and growth of the banking sector and deepening of the financial intermediation • Large scale preparation carried out for the harmonization of the domestic legal and economic environment with the EU requirements • Successful and modern development of the Bulgarian banking sector in the course of accession, introduction of EU and international good banking practices and standards Association of Banks in Bulgaria Presentation to IFBA

15. THANK YOU FOR YOUR ATTENTION! ****** Eleonora Hristoforova Legal adviser, ABB Association of Banks in Bulgaria Presentation to IFBA