EN ECB -PUBLIC  
 
OPINION OF THE EUROPEAN CENTRAL BANK  
of 22 February 2022  
on covered bonds  
(CON/20 22/6) 
 
Introduction and legal basis  
On 24 January 2022 the European Central Bank (ECB) received a request from the Bulgarian Minister of 
Finance  for an opinion on a draft law on covered bonds  (hereinafter the ‘draft law’) . 
The ECB’s competence to deliver an opinion is based on Articles 127(4) and 282(5) of the  Treaty on the 
Functioning of the European Union and the third and sixth indents of Article 2(1) of Council Decision 
98/415/EC1, as the draft law relates to Българска народна банка (Bulgarian National Bank , BNB)  and to 
rules applicable to the financial institutions insofar as they materially influence the stability of financial 
institutions and markets . In accordance with the first sentence of Article 17.5 of the Rules of Procedure of 
the European Central Bank, the Governing Council has adopted this opinion.  
 
1. Purpose of the draft law  
1.1 The main purpose of the draft law is to implement Directive (EU) No 2019/2162 of the European 
Parliament and of the Council2 in Bulgarian law. Under the draft law only authorised credit institutions 
may issue covered bonds. The draft law accordingly designates BNB as the competent authority 
responsible for the public supervision of covered bonds issued by credit institutions and confers on 
it supe rvisory, investigatory and sanctioning powers in relation to the compliance with the 
requirements of the draft law of  credit institutions issuing covered bonds, including under covered 
bond programmes . More particularly, BNB is to authorise the issuance by credit institutions of a 
covered bonds programme and to concur with the appointment of the monitoring body for the cover 
pool. BNB may impose various supervisory measures  on issuer credit institutions . BNB may appoint 
a special administrator for the covered bond in the event the respective conditions of the draft law 
are met. BNB is also required to make certain disclosures, including the publication on its website of 
the list of credit institutions permitted to issue covered bonds . The draft law supplements Article 16 
of the Law on BNB3 to reflect the new powers of BNB.  
1.2 In addition, the draft law repeals the Law on mortgage bonds4.  
 
1  Council Decision 98/415/EC of 29  June 1998 on the consultation of the European Central Bank by national authorities 
regarding draft legislative provisions ( OJ L 189, 3.7.1998, p. 42). 
2  Directive (EU) 2019/2162 of the European Parliament and of the Council of 27 November 2019 on the issue of covered 
bonds and covered bond public sup ervision and amending Directives 2009/65/EC and 2014/59/EU (OJ L 328, 
18.12.20 19, p. 29).  
3  Law on BNB (Закон Българската народна банка, обн. ДВ, 46 от 10.06.1997 г.) .  
4  Law on mortgage bonds  (Закон за ипотечните облигации , обн. ДВ, бр. 83 от 10.10.200 0 г.).  
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2 1.3 Finally, the draft law amends a number of other laws. Most notably , the draft law amends the Law on 
credit institutions5 to provide that the  Directorate for the Protection of the Financial Interests of the 
European Union of the Ministry of the Interior  may have access to the central credit register and the 
bank account register  operated by BNB . 
 
2. General observations  
The ECB welcomes the draft law’s introduction of a new legal regime for covered bonds, which aims to 
contribute to the development of the Bulgarian capital market and improve the level of protection and legal 
certainty for investors6. 
  
3. Conferral of new tasks on BNB regarding the supervision of covered bonds  
3.1 New tasks of BNB  
3.1.1  The draft law confers tasks concerning the supervision of covered bonds on BNB . There is no  existing 
national legislation  on covered bonds  in Bulgaria and BNB does not have any relevant supervisory 
tasks under the existing Law on mortgage bonds which is repealed by the draft law . Therefore, the  
draft law confers new tasks on BNB.  
3.1.2  The ECB emphasises that a proposed conferral of new tasks on a national central bank (NCB)  
participating in the European System of Central Banks (ESCB) must be assessed against the 
prohibition on monetary financing under Article 123 (1) of the Treaty. For the purposes of that 
prohibition, Article 1(1)(b)(ii) of Council Regulation (EC) No 3603/937 defines ‘other type of credit 
facility’ as, inter alia, ‘any financing of the public sector’s obligations vis -à-vis third parties’ . 
3.1.3   Ensuring that Member States implement a sound budgetary policy is one of the key objectives of the 
prohibition on monetary financing. Therefore, the task of financing measures, which are normally the 
responsibility of the Member States, and which are financed from their budgetary sources rather than 
by the NCBs, must not be entrusted to NCBs. To decide what constitut es financing of the public 
sector’s obligations vis -à-vis third parties, which can be translated as the provision of central bank 
financing outside the scope of central bank tasks, it is necessary to carry out, on a case- by-case 
basis, an assessment of whether the task to be undertaken by an NCB is a central bank task or a 
government task, i.e. a task within the responsibility of the Member States . 
3.1.4  As part of its discretion in the exercise of its duty, on the basis of Article 271(d) of the Treaty and  
Article 35.6 of the Statute of the European System of Central Banks and of the European Central Bank (hereinafter the ‘Statute of the ESCB’), to ensure that NCBs honour the obligations laid down 
by the Treaty, the Governing Council has endorsed safeguards in the form of criteria for determining 
what may be considered as falling within the scope of ‘the public sector’s obligations vis -à-vis third 
parties’ within the meaning of Article 1(1)(b)(ii) of Regulation (EC) No 3603/93 or, in other words, 
 
5  Law on credit institutions (Закон за кредитните институции, обн. ДВ, бр. 59 от 21.07.2006 г.) .  
6  See paragraph 4.1 of Opinion CON/2017/36 and paragraph 4.1 of Opinion CON/2018/18. All ECB opinions are 
published on EUR -Lex. 
7  Council Regulation (EC) No 3603/93 of 13 December 1993 specifying definitions for the application of the prohibitions 
referred to in Articles 104 and 104b (1) of the Treaty (OJ L 332, 31.12.1993, p . 1). 
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3 what constitutes a government task, as follows:  
First, central bank tasks are, in particular, those tasks that are related to the tasks that have been 
conferred upon the ECB and the NCBs by the Treaty and the Statute of the ESCB. These tasks are 
mainly defi ned in Article 127(2), (5) and (6), and Article 128(1) of the Treaty, as well as in Article 22 
and Article 25.1 of the Statute of the ESCB . 
Second, as Article 14.4 of the Statute of the ESCB allows NCBs to perform ‘functions other than 
those specified in [ the Statute of the ESCB] ’, new tasks, i.e. tasks that are not related to tasks that 
have been conferred upon the ECB and the NCBs, are not precluded per se. However, new tasks 
that are undertaken by an NCB and which are atypical of NCB tasks or which are c learly discharged 
on behalf of, and in the exclusive interest of the government or of other public s ector entities, should 
be considered government tasks . 
Third, an important criterion for qualifying a new task as atypical of an NCB task, or as being clearly 
discharged on behalf of and in the exclusive interest of the government or other public sector entities, 
is the impact of the task on the institutional, financial and personal independence of that NCB . 
In particular, the following aspects should be  taken into account : 
(a) whether the performance of the new task creates conflicts of interest with existing central bank tasks which are not adequately addressed, and its performance does not necessarily 
complement those existing central bank tasks. If a conf lict of interest arises between existing 
and new tasks, sufficient safeguards to mitigate that conflict should be in place. The complementarity between a new task and existing central bank tasks should not be interpreted 
broadly so that it could lead to the creation of an indefinite chain of ancillary tasks. Such complementarity should be examined in relation to the financing of those tasks ; 
(b) whether without new financial resources the performance of the new task is disproportionate 
to the NCB’s financial or  organisational capacity, and may have a negative impact on the 
capacity to properly perform the existing central bank tasks ; 
(c) whether the performance of the new task fits into the institutional set -up of the NCB in the light 
of central bank independence and accountability considerations ; 
(d) whether the performance of the new task harbours substantial financial risks ; 
(e) whether the performance of the new task exposes the members of the NCB decision- making 
bodies to political risks that are disproportionate and may also have an impact on their personal 
independence and, in particular, on the guarantee of term of office set out in Article 14.2 of the 
Statute of the ESCB . 
3.1.5  The systematic categorisation of tasks assigned to NCBs as central banking or government tasks 
applies to genuinely new tasks that did not exist in the past or did not form an integral part of the 
central banking tasks already assigned to the NCB in the past. In recognition of the different Member States’ legal frameworks, central banking traditions and national set -ups, the tasks currently 
discharged by an NCB as central banking tasks are not reviewed and re- categorised,  but may be 
reassessed if they are subject to legislative amendments of substance
8. On the basis of the criteria 
 
8  This statement of the approach taken reflects, for example, paragraph 2.3.1 of Opinion CON/2015/22.  
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4 set out in paragraph 3.1.4, the following paragraphs assess whether the draft law is in line with the 
prohibition on monetary financing.  
3.2 Tasks related to the tasks conferred upon the ECB and the NCBs by the Treaty and the Statute of the ESCB  
BNB’s proposed new task o f supervising covered bonds is not related to the tasks conferred upon 
the ECB and the NCBs by the Treaty and the Statute of the ESCB . 
3.3 Tasks which are atypical of central bank tasks  
The task of supervising covered bonds is not atypical of central bank tasks. This task complements 
the existing role of several NCBs as supervisors of credit institutions. A central bank acting as a 
banking supervisor may be entrusted with the task of supervising covered bonds due to its specific 
expertise regarding credit institutions’ balance sheets, which is relevant to ensuring compliance with 
the requirements relating to the high quality of covered assets with the purpose of ensuring the robustness of the covered pool . 
In the implementation of Directive (EU) 2019/2162, or under other relevant provisions of national law, Member States have conferred supervisory tasks in relation to covered bonds on a wide range of 
public authorities including central banks, financial supervisory authorities (some of which are central 
banks), and securities market supervisors. More concretely, the ECB has identified ten Member 
States that have  directly conferred these supervisory tasks or a substantial part of these supervisory 
tasks on the ir NCBs
9. The ECB also understands that in the implementation of Directive (EU) 
 
9  In Belgium , the law of August 3, 2012 establishing a legal regime for Belgian covered bonds designates the National 
Bank of Belgium (NBB) as the relevant authority to grant two types of authorisations to credit institutions for the 
issuance of covered bonds . A first  type is to verify that credit institutions  have the organi sational capacity to issue 
covered bonds. In this respect, the NBB is responsible for granting such authorisation vis -à-vis less significant 
institutions. The second  type, which is granted by the NBB regardless of the significance of the institution, aims to 
verify whether the credit institution satisfies all requirements specifically related to the issuance of the covered bonds.  
In Cyprus , Law (130 (I)/2010) on covered bonds, designates the Central Bank of Cyprus (CBC) as the competent 
authority for the purpose of the inscription and maintenance of a covered bonds register (sections 12 to 17). The CBC 
is also entitled to appoint a covered bond monitor in certain circumstances. Administrative Decisi on 463/2006 issued 
under the provisions of the above Law constitutes the regulatory framework for the issue of covered bonds . In the 
Czech Republic , Act No. 6/1993 on Czech National Bank (CNB) refers to the supervisor of entities operating in the 
financial  market as one of the functions of CNB. On this basis, Act No. 190/2004 Coll., on Bonds, refers to CNB as the 
authority which must be informed by the issuer institutions of  their compliance with the terms of the Act (Article 32) or 
the authority in charge of appointing the forced administrator of covered pools (Article 32.d).  In Greece , article 152 of 
Law 4261/2014 and the Bank of Greece’s Governor’s Act No 2620/2009 currently set the conditions for qualifying the 
bonds issued by credit institutions as covered bonds for supervisory purposes. Bank of Greece has been designated 
as the competent au thority in this respect and has been empowered, among other things, to define the assets that 
form the cover pool, to establish rules on the assets’ valuation and to ensure proper monitoring of the coverage. In 
addition, the covered bond program must be au thorized by the Bank of Greece  before issuance takes place. Bank of 
Greece  may also appoint an administrator in the event of the issuer’s insolvency.  In Ireland , under section  54 of the 
Asset Covered Securities Act, 2001, the Central Bank of Ireland (CBI ) is entitled to have access to the issuing 
institution’s register of public credit covered securities. On the basis of this same provision, the CBI may specify 
requirements in relation to the valuation of the assets in the covered pool held by the issuer in stitutions. The CBI may 
appoint the cover assets monitor in specific circumstances and possesses investigative powers in relation to the 
activities that the issuer institutions carry out on the basis of the Act ( Part 5 ). In Netherlands , sections 3:33a and 3:33b 
of the amendment of the Financial Supervision Act ( Wet op het financieel toezicht ), Section  40d up to and including 
Section 40k of the Decree on Prudential Rules for Financial Undertakings ( Besluit prudentiële regels ), and section 20d 
up to and including Section 20i of the Regulation Implementing the Financial Supervision Act ( Uitvoeringsregeling ), 
set the conditions and minimum requirements that an issuing institution must meet if bonds issued or to be issued by 
that institution are to qualify as cov ered bonds that may be entered in the public register of covered bonds maintained 
by De Nederlansche Bank (DNB). In addition to maintaining the public register of covered bonds, DNB is responsible to assess the conditions and minimum requirements referred to above. In the Explanatory Memorandum ( memorie 
van toelichting ) accompanying the introduction of this legal framework, it is mentioned that the scope of supervision 
by DNB is extended with the introduction of this legal framework. In  Romania , Law no.304/2015 on mortgage bonds 
issuance and Regulation no. 1/2016 on the activity of issuing mortgage bonds confers supervisory powers on the 
Banca Naţională a României regarding mortgage bonds issued by credit institutions, such as the prior authorisat ion of 
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5 2019/2162 several Member States are considering conferring tasks relating to the supervision of 
covered bonds on their respective NCBs . 
BNB is the body responsible for the sup ervision of credit institutions on the basis of Article 1(2) of 
the Law on credit institutions , which in accordance with the draft law are the only entities that may 
issue covered bonds in Bulgaria. Given BNB’s existing role in the supervision of credit institutions, a 
role which numerous other ESCB NCBs fulfil in relation to such institutions in their respective Member States, its new tasks under the draft law are not atypical of central bank tasks . 
3.4 Tasks clearly discharged on behalf of and in the exclusive interest of the government  
For the same reasons, BNB’s new supervisory tasks in relation to covered bonds issued by credit 
institutions are not tasks discharged on behalf of and in the exclusive interest of the government. 
BNB already plays a rol e in the prudential supervision of credit institutions. There is no indication 
that, in carrying out the new tasks conferred by the draft law, BNB  would be acting exclusively in the 
interest of another public authority . 
3.5 Extent to which performance of the new tasks creates conflicts of interest with existing central bank 
tasks 
Since BNB’s new tasks under the draft law complement its existing tasks, no conflicts of interest 
arise with other aspects of BNB’s mandate.  
3.6 Extent to which the performance of the new tasks is disproportionate to BNB’s financial or 
organisational capacity  
BNB must have  sufficient resources, including personnel, for the performance of assessments and 
the issuance of directions under the draft law, so that its capacity to perform its ESCB -related tasks 
is not affected. In this regard, the draft law does not specifically address how the additional expenses 
that arise from granting BNB these additional powers will be financed. The ECB understands that 
the additional resources required by BNB  to exercise these additional powers will be financed 
through its existing budgetary framework and so there will be no specific cost recovery mechanism 
designed to ensure the full recovery of the costs incurred in carrying out the supervision of covered  
bonds. However, the performance of the new tasks by BNB is not  disproportionate to its financial or 
organisational capacity . 
3.7 Extent to which performance of the new tasks fits into BNB ’s institutional set -up, in the light of central 
bank independence and accountability considerations  
The performance of the new tasks appears to be aligned with BNB’s institutional set -up and, as 
mentioned in paragraph 3.3, its role as the prudential supervisor of credit institutions.  
 
each issuance of mortgage bonds by the issuer institution. In Slovakia, according to the law amending and 
supplementing the Act No 483/2001 Coll. on Banks, Národná banka Slovenska, as a national competent authority for 
supervision of the financial m arket, is designated as the only competent authority for the purpose of Division Twelve 
(“Covered Bonds Programmes”) of the Act . In Slovenia , the Mortgage Bond and Municipal Bond Act ( Zakon o 
hipotekarni in komunalni obveznici ) requires from the issuing in stitution the need to obtain an authorisation from Banka 
Slovenije before issuing mortgage and municipal bonds. To that end, this Act establishes the methodology for 
determining the conditions for obtaining such authorisation (Articles  8 and 9). Banka Slov enije is also responsible for 
issuing and withdrawing the authorisation to the custodian of the cover register (Article 43).  With regard to Spain see 
Opinion CON/2021/34 and Royal Decree 24/2021 of 2 November 2021 ( Real Decreto -ley 24/2021 ). 
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6 3.8 Extent to which the performance of the new tasks harbours substantial financial risks  
The performance of the new tasks does not harbour substantial financial risks for BNB . The draft law 
provides that  BNB and its authorised officials are not liable for damage in the exercise of their 
covered bond public supervision functions, unless they acted intentionally or with gross negligence.  
3.9 Extent to which the performance of the new tasks exposes members of BNB’s d ecision -making 
bodies to disproportionate political risks and has an impact on their personal independence  
The performance of the new tasks conferred by the draft law does not expose members of BNB’s 
decision -making bodies to any disproportionate political  risk or have an impact on their personal 
independence.  
3.10 Conclusion  
The new tasks conferred by the draft law on BNB regarding the supervision of the issuance of 
covered bonds by credit institutions can be regarded as central bank tasks, as they would 
complement BNB’s existing functions in relation to the prudential supervision of credit institutions. 
The new tasks conferred by the draft law are not atypical of central bank tasks and have been 
conferred on a number of other ESCB NCBs . 
 
This opinion will b e published on EUR -Lex. 
 
 
Done at Frankfurt am Main, 22 February  2022.  
 
[signed]  
 The President of the ECB  
Christine  LAGARDE