EN ECB -PUBLIC  
 
OPINION OF THE EUROPEAN CENTRAL BANK  
of 29 November  2017  
on benchmarks in financial instruments and financial contracts  
(CON/20 17/52)  
 
Introduction and legal basis  
On 6 October 2017 the European Central Bank (ECB) received a request from Българска народна 
банка (Bulgarian National Bank) (BNB), following correspondence exchanged between BNB and the 
Minister of Finance,  for an opinion on a draft law on payment services and payment systems1 (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 indent of Article  2(1) of Council Decision 98/415/EC2, as 
the draft law relates to BNB.  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 
One of the aims of the draft law  that the ECB’s previous opinion on the draft law3 did not address is the 
implement ation in Bu lgaria of some elements of Regulation (EU) 2016/1011 of the European Parliament 
and of the Council4. In particular , BNB will be designated as the competent authority responsible for 
carrying out the duties specified under Regulation (EU) 2016/1011  in relat ion to administrators of interest 
rate benchmarks and the relevant supervised entities , which are credit institutions within the meaning of 
Regulation (EU) No 575/2013  of the European Parliament and of the Council5, creditors within the 
meaning of Directiv e 2008/48/EC  of the European Parliament and of the Council6, and non-credit 
institutions within the meaning of Directive 2014/17/EU  of the European Parliament and of the Council7. 
                                                 
1  In particular, BNB has reconsulted the ECB on certain provisions of the draft law which were not included in the 
original draft on which the ECB issued Opinion CON/2017/28. All ECB opinions are available on the ECB’s website 
at www.ecb.europa.eu.  
2  Council Decision 98/415/EC o f 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) . 
3  Opinion CON/2017/28.  
4  Regulation (EU) 2016/1011 of the European Parliament and of the Council of 8 June 2016 on indices used as 
benchmarks in financial instruments and financial contracts or to measure the performance of investment funds and 
amending Directives 2008/48/EC and 2014/17/EU and Regulation (EU) No 596/2014 (OJ L 171, 29.6.2016, p. 1).  
5  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).  
6  Directive 2008/48/EC  of the European Parliament and of the Council of 23 April 2008 on credit agreements for 
consumers and repealing Council Directive 87/102/EEC ( OJ L 133, 22.5.2008, p. 66).  
7  Directive 2014/17/EU of the European Parliament and of the Council of 4 February 2014 on credit agreements for 
consumers relating to residential immovable property and amending Directives 2008/48/EC and 2013/36/EU and 
Regulation (EU) No 1093/2010 ( OJ L 60, 28.2.2014, p. 34).  
ECB -PUBLIC  
2 BNB will therefore have the supervisory powers set out in Article 41 of Regu lation (EU) 2016/1011, as 
well as the power to impose administrative sanctions and other administrative measures in relation to  
infringements , in accordance with Article 42 thereof . The draft law also amends the Law on Българска 
народна банка (Bulgarian National Bank)8 in order to ensure that the Governing Council of BNB is 
competent to adopt the related decisions.  
 
2. General observations  
2.1 The draft law confers upon BNB  the new task of supervising compliance of admin istrators of 
interest rate benchmarks and the relevant supervised entities with Regulation (EU) 2016/1011 . 
Where a new task is conferred on a national central bank ( NCB ) in the European System of Central 
Banks (ESCB) it must be assessed against the prohibi tion on monetary financing under Article 123 
of the Treaty. For the purposes of that prohibition, Article 1(1)(b)(ii) of Council Regulation (EC)  No 
3603/939 defines ‘other type of credit facility’ as, inter alia, ‘any financing of the public sector’s 
oblig ations vis -à-vis third parties’.  
2.2 Ensuring that Member States implement a sound budgetary policy is one of the key objectives of 
the monetary financing prohibition, which may not be circumvented10. In view of this, the task of 
financing measures, which are normally the responsibility of the Member States and funded from 
their budgetary sources rather than by the NCBs, must not be entrusted to NCBs. To decide what 
constitutes 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. In other words, adequate safeguards must be in place to 
ensure that no circumventions of the objective of the monetary financing prohibition of maintaining 
a sound budgetary policy of Member States t ake place.  
2.3 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’),  and in order  to ensure that NCBs honour the 
obligations laid down by the Treaty, the Governing Council has endorsed safeguards of that kind in 
the form of criteria for determining what may be seen as falling within the scope of a public sector’s 
obligation within the meaning of Article 1(1)(b)(ii) of Regulation (EC) No 3603/93 or, in other words, 
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 defined in Article 127(2), (5) and (6) and Article 128(1) of the Treaty, as well as Article 22 
and Article 25.1 of the Statute of the ESCB.  
                                                 
8 Published in Darjaven Vestnik No 46, 10 June 1997.  
9  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).  
10  Article 123 of the Treaty also serves the objective of m aintaining price stability and reinforces central bank 
independence.  
ECB -PUBLIC  
3 Second, as Article 14.4 of the Statute of the ESCB allows NCBs to perform ‘other functions’, 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 clearly discharged on behalf of , and in the exclusive interest of 
the government or of other public sector entities , should be considered government tasks.  
Third , an important criterion for qualifying a new task as at ypical of an NCB task or as being clearly 
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 does not necessarily complement 
those existing central bank tasks.  If a conflict 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 the existing central bank tasks should not be interpreted broadly, so 
as to lead to the creation of an indefinite chain of ancillary tasks. Such complementarity 
should also 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 perform properly 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 which are disproport ionate 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. Specific observations  
Currently  BNB carries out  activities related to the calcul ation and publication of interest rate benchmarks , 
namely the SOFIBID and SOFIBOR reference rates11, the LEONIA Plus reference rate12, as well as the 
base interest rate in Bulgaria13. While BNB administer s these benchmarks, it has no dedicated 
supervisory function with regard to them.  The draft law therefore confers upon BNB а new task . 
On the basis of the criteria set out in paragraph 2.3, the following paragraphs assess whether BNB’s new 
task is in line with the monetary financing prohibition.  
                                                 
11  On the basis of a contractual agreement between BNB, the Association of Banks in Bulgaria and the ACI Bulgaria-
BDA.  
12  In accordance with the Methodology for calculation of the LEONIA Plus reference rate, adopted by the Governing 
Council of BNB.  
13  In accordance with Article 35 of  the Law on Българска народна банка (Bulgarian National Bank) . 
ECB -PUBLIC  
4 3.1 New tasks rel ated to the tasks conferred upon the ECB and the NCBs by the Treaty and the 
Statute of the ESCB 
The supervision of compliance of administrators of interest rate benchmarks and the relevant 
supervised entities with Regulation (EU) 2016/1011  is not among the central banking tasks listed in 
Article 127(2) or (5) of the Treaty or otherwise conferred upon the NCBs by the Statute of the 
ESCB. Although the new task conferred on BNB relates to overseeing compliance with Union law 
requirements by credit institutions  (among others) , it does not form part of BNB’s prudential 
supervisory tasks. It follows that the new task conferred on BNB under the draft law is not directly 
related to the tasks conferred on the ECB and the NCBs by the Treaty and the Statute of the 
ESCB. Consequently, a careful assessment of t he conferral of this task on BNB  is required in order 
to determine whether it constitutes a government task , and whether the related funding gives rise 
to monetary financing concerns.  
3.2 Tasks which are atypical of NC B tasks  
Designation as a competent authority responsible for carrying out the duties under Regulation (EU) 
2016/1011  in relation to administrators of interest rate benchmarks and the relevant supervised 
entities is a new task for national  authorities in the Union.  
In this regard,  central banks have a particular interest in interest rate benchmarks  which are of 
importance for the monetary policy transmission and financial stability14. In fact , the ECB itself is 
also planning the compilation and publi cation of a new unsecured overnight interest rate 
benchmark15. 
While t he majority of Member States have designated national capital markets supervisors  for this 
task, the ECB has ident ified a number of Member States, including the Czech Republic16, 
Portugal17 and Slov akia18, where NCBs have been conferred at least part of the tasks under 
Regulation (EU) 2016/1011 . 
The new task conferred on BNB by the draft law does not, therefore, appear to be atypical for a n 
NCB  of the ESCB.  
3.3 Impact of the tasks on the independence of B NB 
The potential impact of the new task on the institutional, financial and personal independence of 
BNB must also be taken into consideration.  
3.3.1  Extent to which the performance of the new task creates conflicts of interest with existing central 
bank tasks  
                                                 
14  See Opinion CON/2014/2 and the European Commission’s public consultation on the regulation of indices – 
Eurosystem’s response, November 2012.  
15  See press release, ‘ECB to publish new unsecured overnight interest rate’ , 21 September 2017, available on the 
ECB’s website at www.ecb.europa.eu.  
16  Article  192a(1)(j) of Law No 256/2004 Coll. on capital market undertakings designates Česká národní banka as the 
competent authority for the purposes of Regulation (EU) 2016/1011 effective as of 3 January 2018.  
17  Article 2, n.º 1, al. b of Regulatory Decree No 8/2017 designates the Banco de Portugal as competent national 
authority for the supervision of the use of benchmark indices in financial contracts entered into by entities subject to 
its supervision.  
18  Article  132s of the Law on securities and investment services designates Národná banka Slovenska as the 
competent authority for implementing author isations in relation to authorisations in respect of the indice s used as 
benchmarks in financial instruments and financial contracts or to measure the performance of investment funds.  
ECB -PUBLIC  
5 As noted above,  BNB is already performing activities related to the calculation and publication of 
interest rate benchmarks and is consequently administering these benchmarks.  Central banks are 
not subject to Regulation (EU) 2016/1011, as they already meet principles, standards and 
procedures that ensure that they carry out  their activities with integrity and in an independent 
manner19. To the extent that BNB has been conferred the tasks of supervising administrators of 
interest rate benchmarks, potential conflicts of interest may arise  and t herefore, s ufficient 
safeguards to mitigate such conflict s should be put in place.  
3.3.2  Extent to which the performance of the new task places a disproportionate burden on BNB’s 
financial or organisational capacity  
The principl e of financial independence requires that Member States may not put their NCBs in a 
position where they have insufficient resources to carry out both their ESCB -related tasks and their 
national tasks, from an operational and financial perspective. Furtherm ore, when allocating specific 
new tasks to NCBs, each NCB concerned should have sufficient  financial and human resources at 
its disposal to ensure that the tasks can be carried out without impacting on the NCB’s financial or 
operational capacity to perform  its ESCB tasks. In order to ensure that BNB’s capacity to perform 
its ESCB- related tasks is not impacted, BNB must, therefore, be in a position to avail itself of the 
necessary resources, including personnel, to carry out  supervision under the draft law.  
3.3.3  Extent to which performance of the new task fits into BNB’s institutional set -up, in the light of the 
principles of central bank independence and accountability  
The performance of the new tasks does not appear to be problematic from the perspective of 
BNB’ s institutional set -up or to raise accountability or personal and institutional independence 
concerns.  
3.3.4  Extent to which the performance of tasks harbours substantial financial risks  
The draft law does not directly address BNB’s potential liability in the ev ent of any legal action, 
application or other legal proceeding s for damages in relation to the exercise of its powers under 
the draft law  or the failure to exercise such powers . In the absence of any provision in the draft law 
excluding BNB’s liability in performing the tasks under the draft law, BNB would ultimately be liable 
for damages in accordance with the general liability regime under Bulgarian law . Therefore, the 
new task conferred on BNB under the draft law would entail additional financial risks.  
3.3.5  Extent to which the performance of the new task exposes members of BNB’s decision -making 
bodies to disproportionate political risks and has an impact on their personal independence  
The performance of the new task does not appear to expose the members of BN B’s decision -
making bodies to any disproportionate political risk or to have an impact on their personal 
independence.  
3.4 Conclusion regarding the compatibility of the draft law with the prohibition on monetary financing 
The task of carrying out the duties under Regulation (EU) 2016/1011 in relation to administrators of 
interest rate benchmarks and the relevant supervised entities is not among the central banking 
tasks listed in the Treaty. The new task conferred on BNB could be regarded as complementing 
                                                 
19  See recital 14 and Article 2(2)(a) of Regulation (EU) 2016/1011.  
ECB -PUBLIC  
6 BNB’s  monetary policy and financial stability tasks . Furthermore, this task might be seen as a 
legitimate  task to confer on BNB  given that it does not appear to be atypical for NCBs in the ESCB. 
However , there is uncertainty as regards the size of the additional financial burden imposed on 
BNB in undertaking this task. The ECB therefore recommends that the consulting authority take s 
this concern into account when confer ring upon BNB the new task of carrying out the duties under 
Regulation (EU) 2016/1011 in relat ion to administrators of interest rate benchmarks and the 
relevant supervised entities . 
 
This opinion will be published on the ECB’s website.  
 
 
Done at Frankfurt am Main, 29 November  2017.  
 
[signed]  
 
The President of the ECB  
Mario DRAGHI