Bulgarian Parliament Prepares Changes To Credit Institutions Act

Bulgarian commercial banks’ interest rates for retail and business loans will depend on market benchmark indices LIBOR and EURIBOR, according to a draft law proposal.

MPs from ruling Bulgarian Socialist Party, BSP and liberal predominantly ethnic Turkish party Movement for Rights and Freedoms, DPS are working on changes to Credit Institutions Act, informs “Trud” newspaper.

Interest rates both on consumer and business credits granted by commercial banks will be determined by LIBOR and EURIBOR benchmark indices.

All taxes and commissions that banks currently charge their clients in order to process their loan application documents will be dropped.

Early repayment charges on all types of credit – mortgage, business and consumer, will be removed, according to the draft. Default interest on all kind of loans, including mortgage ones, will be limited to the statutory interest rate – i.e. the Bulgarian National Bank (BNB) base rate (0.03%) plus 10%, currently default interest rates charged by banks are higher.

Also, BNB’s regulatory functions will be strengthened in order to enable it to better protect the rights of Bulgarian borrowers, for example – if a bank uses unfair loan agreement terms, BNB will have the power to revoke the bank’s license, informs the newspaper.