EN ECB -PUBLIC  
 
OPINION OF THE EUROPEAN CENTRAL BANK  
of 30 January  2020  
on the sanctioning powers of BNB within close cooperation and the official exchange rate of the 
Bulgarian lev  
(CON/20 20/5) 
 
Introduction and legal basis  
On 21 January 2020 the European Central Bank (ECB) received a request from Българска народна 
банка (Bulgarian National Bank , BNB), following correspondence exchanged between BNB and the 
Bulgarian Minister of Finance,  for an opinion on a draft law amending the Law on credit institutions and 
the Law on BNB (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 first and third indent s of Article  2(1) of Council Decision 
98/415/EC1, as the draft law relates to currency matters, BNB and the tasks conferred on the ECB 
concerning the prudential supervision of credit institutions pursuant to Article 127(6) of  the Treaty . 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  
As explained in the consultation letter , the draft law serves a two-fold purpose in relation to the 
Republic of Bulgaria’s intention to join the Single Supervisory Mechanism (SSM)  and the Exchange 
Rate Mechanism (ERM II).  
1.1 Draft provisions relating to sanctions in the context of banking supervision  
The draft law proposes to amend the Law on credit institutions2 in relation to BNB’s sanctioning 
powers, both in general terms as well as in relation to  ECB instructions in the context of close 
cooperation.  
1.1.1  Proposed changes to the general sanctioning provisions  
The draft law extends the list of breaches which may be subject to sanctions , as set out in 
Article  152(1) of the Law on credit institutions , to also include breaches of other relevant directly 
applicable acts of the European Union,  in addition to the existing list of breaches  of certain specific  
                                                 
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  Law on credit  institutions (Закон за кредитните институции, обн. ДВ,  бр. 59 от 21. 07.2006 г.).  
ECB -PUBLIC  
2 Union legal acts3, of the Law on credit institutions , and of normative acts issued for their 
application . 
1.1.2  Proposed BNB sanctioning powers when acting upon an ECB instruction pursuant to Article 18(1), 
(5) and (7)  of Council Regulation (EU) No 1024/2013  
The draft law proposes to amend Article 121d of the Law on credit institutions, which is contained 
in Chapter 11a on close cooperation with the ECB,  in order to provide explicitly for the different  
scenarios  in which BNB is required to follow ECB requests in relation to administrative penalties  in 
the context of close cooperation.  
On the one hand,  in the event  of requests issued by the ECB, BNB is required to impose a financial 
penalty for a breach of Regulation (ЕU) No 575/2013 or other directly applicable Union acts by a 
credit institution, financial holding company or mixed financial holding company or for a breach or 
non-compliance by a credit institution, financial holding company or mixed financial holding 
company with an administrative act issued under Article 121b.   
On the other hand,  in the event of requests issued by the ECB  in accordance with Article 18 (5) of 
Council Regulation (EU) No 1024/20134, BNB is required to begin a procedure for the imposition of 
administrative sanctions . Also, if BNB establishes a breach of specific  Union legal acts5, of other 
relevant directly applicable Union legal acts,  or of a normative act  issued for  their application , or of 
an individual administrative act issued under th e Law on credit institution, the person committing 
such breach shall be subject to a financial penalty or fine to the amount specified in Article 152(1) 
to (3)  of the Law on credit institutions . 
                                                 
3  Regulation (EU) No 575/2013 of the European Parliament and of the Council of 26 June 2013 on prudential 
requirements for  credit institutions and investment firms and amending Regulation (EU) No 648/2012 ( OJ L  176, 
27.6.2013, p. 1),  Regulation (EU) No 648/2012 of the European Parliament and of the Council of 4 July 2012 on 
OTC derivatives, central counterparties and trade repositories (OJ L 201, 27.7.2012, p. 1), Regulation (EU) 
2015/2365 of the European Parliament and of the Council of 25 November 2015 on transparency of securities 
financing transactions and of reuse and amending Regulation (EU) No 648/2012 (OJ L 337, 23.1 2.2015, p. 1), 
Regulation (EU) No 909/2014 of the European Parliament and of the Council of 23 July 2014 on improving securities 
settlement in the European Union and on central securities depositories and amending Directives 98/26/EC and 
2014/65/EU and Reg ulation (EU) No 236/2012 (OJ L 257, 28.8.2014, p.  1) and Commission Regulation (EU) 
No 1031/2010 of 12 November 2010 on the timing, administration and other aspects of auctioning of greenhouse 
gas emission allowances pursuant to Directive 2003/87/EC of the European Parliament and of the Council 
establishing a scheme for greenhouse gas emission allowances trading within the Community ( OJ L 302, 
18.11.2010, p. 1) . 
4  See Council Regulation (EU) No 1024/2013 of 15 October 2013 conferring specific tasks on the European Central 
Bank concerning policies relating to the prudential supervision of credit institutions ( OJ L 287, 29.10.2013, p. 63) . 
Under Article 18(5) of Regulation (EU) No 1024/2013, in the cases not covered by Article 18(1) of Regulation (EU) 
No 1024/2013, where necessary for the purpose of carrying out the tasks conferred on it by that  Regulation, the ECB 
may require national competent authorities to open proceedings with a view to taking action in order to ensure that 
appropriate penalties are impos ed in accordance with the acts referred to in the first subparagraph of Article 4(3) and 
any relevant national legislation which confers specific powers which are currently not required by Union law. The 
penalties applied by national competent authorities shall be effective, proportionate and dissuasive. This provision 
shall be applicable in particular to pecuniary penalties to be imposed on credit institutions, financial holding 
companies or mixed financial holding companies for breaches of national law tr ansposing relevant Directives, and to 
any administrative penalties or measures to be imposed on members of the management board of a credit 
institution, financial holding company or mixed financial holding company or any other individuals who under national 
law are responsible for a breach by a credit institution, financial holding company or m ixed financial holding 
company.  
5  Regulation (ЕU) No 575/2013, Regulation (ЕU) No 648/2012, Regulation (ЕU) 2015/2365,  Regulation (ЕU) 
No 909/2014 or Commission Regulation (ЕU) No 1031/2010.  
ECB -PUBLIC  
3 Furthermore,  the draft law expands the duty of BNB to adopt a sanction on the basis of 
Article  152(6) of the Law on credit institutions in response to requests made by the ECB in relation 
to all possible tasks listed in Article 121b, namely in relation to significant institutions, less 
significant institutions and macro- prudential tasks.  
1.1.3  Statute of limitations for opening a sanctioning proceeding  
Finally , the draft law specifies that s tatements of objections shall be drawn up by officials 
authorised by the Deputy Governor  of BNB heading the Banking Supervision Department within 
five years of the date of  the breach and,  in case of continued infringement , within five years of the 
date on which the infringement  ceased.  
1.2 Draft provision relating to ERM II  
1.2.1  Current framework for the exchange rate between the lev and the euro  
The Republic of Bulgaria has in place a currency board arrangement with a fixed exchange rate 
between the lev and the euro. In particular, Article 29 of the Law on BNB6, currently in force, 
provi des that the official exchange rate of the lev shall be 1 lev per  1 Deutsche Mark, and that once 
the euro becomes legal tender in the Federal Republic of Germany, the official exchange rate of 
the lev to the euro shall be determined by multiplying that  exchange rate by the official exchange 
rate of conversion of the Deutsche Mark to the euro7. 
1.2.2  Proposed amendments to the current framework for the exchange rate between the lev and the 
euro 
The draft law proposes to supplement the existing provision on the exchange rate between the lev 
and the euro with a provision establishing that f rom the date of participation of the Republic of 
Bulgaria in ERM II,  the official exchange rate of the lev to the euro shall be equal to the central rate 
between the lev and the euro, as agreed per  paragraph 2.3 of the Resolution of the European 
Council on the establishment of an exchange- rate mechanism in the third stage of economic and 
monetary union Amsterdam, 16 June 19978 (Resolution on ERM II ) and Articles  1.1 and 17.1 of t he 
Agreement of 16 March 2006 between the ECB and the national central banks of the Member 
States outside the euro area laying down the operating procedures for an exchange rate 
mechanism in stage  three of Economic and Monetary Union9 (ERM II Central Bank  Agreement) . 
 
2. General observations  
2.1 The draft law seeks to ensure that BNB will be able to adopt any measure requested by the ECB in 
relation to supervised entities, as required under the legal framework regulating close cooperation 
between the ECB and BNB . 
                                                 
6  Law on BNB (Закон за Българската народна банка, обн. ДВ, бр. 46 от 10.06.1997 г.).  
7  See Council Regulation (EC) No 2866/98 of 31 December 1998 on the conversion rates between the euro and the 
currencies of the Member States adopting the euro (OJ L 359, 31.12.1998, p.1).  
8  Resolution of the European Council on the establishment of an exchange- rate mechanism in the third stage of 
economic and monetary union Amsterdam, 16 June 1997 (OJ C 236 2.8. 1997, p. 5).  
9  Agreement of 16 March 2006 between the European Central Bank and the national central banks of the Member 
States outside the euro area laying down the operating procedures for an exchange rate mechanism in stage three 
of Economic and Monetary Union (OJ C 073 25.3.2006, p. 21).  
ECB -PUBLIC  
4 2.2 In this regard i t is highlighted that this opinion is without prejudice to the overall assessment of the 
request filed on 18 July 2018 by the Republic of Bulgaria to establish close cooperation between 
the ECB and BNB, which is taking place in line with t he existing procedures established under 
Article 7 of Regulation (EU) No 1024/2013 and under Decision ECB/2014/5 of the European 
Central Bank10. In particular, this opinion remains without prejudice to the assessment being 
conducted by the ECB in accordance with Article 4 of Decision ECB/2014/5, which includes a 
broader assessment of the relevant national legislation, also taking into account the practical 
implementation of such legislation11. 
 
3. Specific observations  
3.1 Draft provisions relating to the sanctions in the context of banking supervision  
3.1.1  The ECB welcomes that the draft law further refines the sanctioning power s for BNB in order to 
fully align Bulgarian  national  law with the scope of the ECB’s sanctioning power under Article 18 of 
Regulation (EU) No 1024/2013.  
3.1.2  In particular the ECB welcomes that the draft law requires BNB to comply with all ECB requests for 
the sanctioning of breaches of BNB administrative acts issued pursuant to ECB requests 
mentioned in paragraphs 1 to 4 of Article 121b of the Law on credit institutions.  
3.1.3  In addition the ECB welcomes that the draft law explicitly mentions that BNB shall open 
proceedings for the imposition of administrative penalties when so requested by the ECB on the 
basis of Article 18(5) of Regulation (EU) No 1024/2013, in line with the obligations set forth under 
Article 121b of the Law on credit institutions. Moreover , the ECB welcomes that the draft law 
clarifies by means of cross -reference which administrative penalties may be imposed by BNB when 
it is acting upon an ECB request made on the basis of Article 18(5) of Regulation (EU) 
No 1024/2013.  
3.1.4  The ECB welcomes that the draft law aligns the statute of limitations when BNB acts upon a 
request from the ECB with the time limits set out in Article 4 c of Council Regulation (EU) 
No 2532/98 and Article 130 of Regulation (EU) No 468/2014 of the European C entral Bank  
(ECB/2014/17)12, namely five years after the breach occurred or, in case of a continued 
infringement, five years after the infringement ceased.  
                                                 
10  Decision ECB/2014/5 of the European Central Bank of 31 January 2014 on the close cooperation with the national 
competent authorities of participating Member States whose currency is not the euro (OJ L 198, 5.7.2014, p. 7).  
11  See paragraph 2.3 of Opinion CON/2018/49. All ECB Opinions are published on the ECB’s website at 
www.ecb.europa.eu.  
12   Regulation (EU) No 468/2014 of the European Central Bank of 16 April 2014 establishing the framework for 
cooperation within the Single S upervisory Mechanism between the European Central Bank and national competent 
authorities and with national designated authorities (SSM Framework Regulation) (ECB/2014/17) (OJ L 141, 
14.5.2014, p. 45).  
ECB -PUBLIC  
5 3.2 Draft provision relating to ERM II  
The ECB welcomes the new provision of Article 29(3) of the Law on BNB, which is in line with the 
procedures under the ERM II Resolution and the ERM II Central Bank Agreement.  
 
This opinion will be published on the ECB’s website.  
 
 
Done at Frankfurt am Main, 30 January  2020.  
 
[signed]  
 
The President of the ECB  
Christine  LAGARDE