site.btaMinisters Approve Draft of New Central Bank Law

The government on Wednesday approved the draft of a new law on the Bulgarian National Bank (BNB). The proposed law is aimed to ensure the legal integration of the country's central bank into the Eurosystem as Bulgaria joins the eurozone. The Eurosystem consists of the European Central Bank (ECB) and the national central banks of the eurozone countries.

The bill is intended to transpose in full measure the requirements of EU law into national legislation. It will remedy the legal inconsistencies identified in the convergence reports of the ECB and the European Commission for 2022 and in earlier reports. These inconsistencies concern the legal framework for monetary policy, the collection of statistical data, the management of international currency reserves, payment systems, banknote printing, the election of independent auditors, financial reporting, forex policy and international cooperation, among other things. The removal of the legal inconsistencies is one of the measures in the action plan for implementing Bulgaria's commitments arising from the country's accession to Exchange Rate Mechanism II in 2020.

The new BNB law will create a legal framework completely conforming to the provisions of the Treaty on the Functioning of the European Union and the Audit Charter for the Eurosystem/European System of Central Banks and the Single Supervisory Mechanism.

It will define the status of the euro as legal tender, establish the design of the national side of the euro coins, and regulate the release, withdrawal, replacement, exchange and reproduction of euro banknotes and euro coins.

The bill expressly names the types of assets and instruments in which BNB reserves can be invested. In accordance with the effective framework, it proposes expanding the credit quality assessment basis for some such instruments by stipulating that the assessment will be based on the three (instead of two) highest ratings published by two internationally recognized credit rating agencies. The idea is to broaden the investment opportunities by adding slightly higher-risk instruments that could potentially bring higher profits.