Opinion of the European Central Bank of 24 October 2012 on fiscal rules and on the servicing of bank accounts and payments of budget organisations (CON/2012/79)
Date: 2012-10-24
Institutions: European Central Bank
Subjects: Bulgaria, account, bank, central bank, financial transparency, fiscal policy, national law, public finance

EN 

ECB-PUBLIC 

OPINION OF THE EUROPEAN CENTRAL BANK 

of 24 October 2012  

on fiscal rules and on the servicing of bank accounts and payments of budget organisations 

(CON/2012/79) 

Introduction and legal basis 

On 28 August 2012, the European Central Bank (ECB) received a request from the Bulgarian Ministry of 

Finance for an opinion on a draft law on public finance (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/EC of 

29 June  1998  on  the  consultation  of  the  European  Central  Bank  by  national  authorities  regarding  draft 
legislative provisions1, as the draft law relates to Българска народна банка (Bulgarian National Bank or 

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 

The  aims  of  the  draft  law  are  to:  (a) improve  the  system  for  public  finance  management,  including 

through  the  application  of  fiscal  rules  by  the  central  and  local  authorities;  (b) provide  for  the  common 

organisation  and  structure  of  public  finances  as  an  integrated  system  for  ensuring  and  financing  public 

goods  and  services,  the  reallocation  and  transferring  of  incomes  and  the  accumulation  of  resources  by 

budget organisations; (c) consolidate national fiscal rules, inter alia, by introducing rules for the structural 

deficit, and for the deficit and consolidated debt of the general government sector; (d) transpose Council 

Directive 2011/85/EU  of  8  November  2011  on  requirements  for  budgetary  frameworks  of  the  Member 
States2  and  create  the  conditions  for  the  implementation  of  related  regulations;  and  (e) provide  for 

detailed rules on the servicing of bank accounts and payments of budget organisations by BNB and by 

banks, and for the interaction between BNB and the Ministry of Finance with regard to such servicing. 

The system for public finance management established by the draft law is combined with a system for the 

servicing  of  bank  accounts  and  payments  of  budget  organisations.  The  servicing  of  bank  accounts  of 

budget organisations and budget organisation payments is carried out by BNB and by banks, subject to 

the  rules  laid  down  in  the  draft  law,  and  in  accordance  with  the  joint  instructions  of  the  Minister  for 

1  
2  

OJ L 189, 3.7.1998, p. 42.  
OJ L 306, 23.11.2011, p. 41.  

 
 
 
 
                                                 
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Finance  and  the  Governor  of  BNB.  Funds  from  the  Union  are  paid  into,  kept  and  serviced  in  bank 

accounts at BNB. A limited number of exceptions to this rule are set out in the draft law.  

In order to ensure that public funds are secured, where accounts and payments of budget organisations are 

serviced by banks, the banks will guarantee the full amount of available cash funds in all accounts and 

deposits serviced by them in levs and exchangeable currency of the budget organisations. In this respect, 

BNB  shall  carry  out  services  to  enable  the  banks  to  guarantee  the  funds  in  favour  of  the  Ministry  of 

Finance. The types of guarantee are set out in the draft law. The Minister for Finance and the Governor of 

BNB can change the amount and the type of bank assets which serve as guarantee, as well as the terms 
and conditions of the guarantee referred to in the draft law3. 

The  accounts  of  the  budget  organisations  with  BNB  are  organised  and  serviced  in  a  single  system  for 

collection,  deposit,  payment  and  accounting  (hereinafter  the  ‘single  account’).  BNB  services  the  single 

account  and  the  other  accounts  and  payments  of  budget  organisations  in  accordance  with  the  rules 

provided  for  in  the  draft  law,  and  with  the  requirements  of  Article 43  of  the  Law  on  the  Bulgarian 
National Bank (hereinafter the ‘Law on the BNB’)4. BNB, on behalf and on the account of the Ministry of 

Finance, services the accounts of the budget organisations included in the single account. The Ministry of 

Finance  pays  BNB  on  a  contractual  basis  for  the  servicing  of  the  single  account  and  for  the  services 
connected with information provision for the accounts of budget organisations5.  

2. 

Prohibition on monetary financing 

2.1 

It  is  important  to  safeguard  compliance  with  the  monetary  financing  prohibition  pursuant  to 

Article 123 of the Treaty. The prohibition is essentially designed to prevent national central banks 
(NCBs) from providing overdraft facilities or any other type of credit facility to the public sector6. 

National legislation may not therefore require that an NCB finance the performance of functions of 
other public sector bodies7. In this regard, the ECB notes that the draft law stipulates that payments 

in the single account system are carried out up to the amount of the total availability of the single 

account, within the framework of the relevant availability and limits referred to in Article 154(1), 

(13), and (14) of the draft law. BNB does not bear liability for non-payments or delayed payments 

3  
4  

5  
6 

7  

Article 152(8) of the draft law. 
According  to  this  provision,  the  BNB  shall  act  as  a  fiscal  agent  and  depository  of  the  State  pursuant  to  contracts 
concluded  and  under  market  conditions  and  at  market  prices  of  services.  In  this  capacity,  the  BNB  is  inter  alia 
responsible for executing bank servicing of accounts and payments included in the single account system, in the name 
and for the account of the Ministry of Finance; collecting and submitting to the Ministry of Finance regular information 
about the accounts of public-financed enterprises with banks in Bulgaria; and acting as a government debts agent and a 
government guaranteed debts agent. In its capacity as a government debts agent, the BNB keeps government securities 
accounts,  which  shall  be  registered  according  to  debt  transferees.  BNB  may  act  as  an  authorised  representative  of  the 
Council of Ministers for purposes and under conditions established thereby and by the Council of Ministers. 
Article 154(12) of the draft law. 
is  further  clarified  by  Council 
The  precise  scope  of  application  of 
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). 
ECB Convergence Report 2012, p. 29. 

the  monetary  financing  prohibition 

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due  to  an  insufficiency  of  funds  in  the  single  account8.  The  ECB  understands  that  temporary 
interest-free loans9 from accounts which will be serviced by BNB do not involve any financing by 

the BNB as this would otherwise not be compliant with the monetary financing prohibition.  

2.2  The ECB acknowledges that the draft law refers to services to be carried out by BNB as agent of 

the State. Article 21.2 of the Statute of the European System of Central Banks and of the European 

Central Bank (hereinafter the ‘Statute of the ESCB’) establishes that the ‘ECB and national banks 

may act as fiscal agents’ for ‘Union institutions, bodies, offices or agencies, central governments, 

regional,  local  or  other  public  authorities,  other  bodies  governed  by  public  law,  or  public 

undertakings  of  Member  States’.  The  ECB  understands  that  the  provision  of  services  by  BNB 

pursuant  to  the  draft  law  is  to  be  read  in  conjunction  with  Article 43  of  the  Law  on  the  BNB, 

according  to  which  BNB  shall  act  as  the  fiscal  agent  and  depositary  of  the  State  by  virtue  of 

contracts concluded at market conditions and prices. As noted in the ECB’s Convergence Report, 

national  legislation  that  enables  an  NCB  to  hold  government  deposits  and  to  service  government 

accounts does not raise concerns about the compliance with the monetary financing prohibition as 

long  as  such  provisions  do  not  allow  the  extension  of  credit,  including  overnight  overdrafts,  and 
that deposits or current account balances are not remunerated above market rates10. 

3. 

Central bank independence 

The  ECB  expects  that  BNB’s  involvement  will  be  fully  compatible  with  its  institutional  and  financial 
independence11 to safeguard the proper performance of its tasks under the Treaty and the Statute of the 

ESCB.  The  principle  of  central  bank  independence,  inter  alia,  requires  that  Member  States  do  not  put 

their  NCBs  in  a  position  where  they  have  insufficient  financial  resources  and  inadequate  net  equity  to 
carry  out  their  tasks  related  to  the  European  System  of  Central  Banks  or  Eurosystem12.  The  ECB 

acknowledges  that  the  envisaged  arrangements  serve  the  system  of  servicing  of  the  bank  accounts  and 

payments of budget organisations, and consequently of the system for public finance management. The 

ECB understands that instructions of the Minister for Finance relating to the services of BNB are limited 

to the role of the State and the budget organisations as clients and beneficiaries of accounts serviced by 

BNB.  Furthermore,  the  ECB  notes  that  BNB  is  able  to  charge  appropriate  fees  for  the  provision  of 

services under the draft law. 

8  
9  
10  

11  
12  

Article 154 (21) of the draft law. 
Articles 104 and 142 of the draft law. 
ECB  Convergence  Report  2012,  p.31;  see  also  Opinions  CON/2012/44  paragraph  3.3  and  CON/2012/63  paragraph 
6.2.2.All ECB opinions are published on the ECB’s website at www.ecb.europa.eu. 
See ECB Convergence Report 2012, pp. 21-28. 
See Opinion CON/2012/63 paragraph 6.1. 

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4. 

Accountancy and statistics 

With  regard  to  accountancy,  the  ECB  notes  that  Article 165(1)  provides  that  the  Ministry  of  Finance, 

upon  agreement  with  the  National  Statistical  Authority,  may  instruct  enterprises  which  are  not  budget 

organizations  and  which  fall  within  the  general  government  sector  to  apply  the  relevant  standards, 

instructions and accountancy plans. The list of these enterprises shall be published on the websites of both 

institutions. The ECB is of the opinion that complete and reliable public accounting practices for all sub-

sectors of general government are a precondition for the production of high-quality statistics. In addition, 

Article 169 of the draft law specifies that the standards, instructions and accounting plan will provide the 

statistical information for preparation of the data on the general government sector and its subsectors in 

accordance with the requirements of the Union. To ensure high-quality statistics, the ECB considers that 

this provision could benefit from a reference to Council Regulation (EC) No 679/2010 of 26 July 2010 

amending  Regulation  (EC)  No 479/2009  as  regards  the  quality  of  statistical  data  in  the  context  of  the 
excessive deficit procedure13 which strengthens the Commission’s powers to access a widened scope of 

information  for  the  needs  of  data  quality  assessment,  in  full  compliance  with  Council  Regulation  (EC) 
No 223/2009 of the European Parliament and of the Council of 11 March 2009 on European statistics14 

establishing a legislative framework for the production of European statistics. The latter Regulation also 

lays down the principles governing the development, production and dissemination of European statistics 

as  regards  professional  independence,  impartiality,  objectivity,  reliability,  statistical  confidentiality  and 

cost-effectiveness. 

5. 

Numerical fiscal rules 

The  draft  law  contains  numerical  fiscal  rules  associated  with  automatic  correction  mechanisms  where 

expected  budgetary  outcomes  deviate  from  targets.  The  ECB  considers  that  numerical  fiscal  rules 

contribute  to  enhancing  fiscal  discipline  as  intended  under  the  strengthened  Union  governance 

framework.  To  ensure  full  compliance  with  Union  fiscal  governance  rules  and  possible  future  changes 
thereto, the draft act should refer to the relevant Union legislation15.   

6. 

Fiscal transparency 

The  availability  of  timely  and  reliable  fiscal  data  is  crucial  to  the  proper  functioning  of  budgetary 

surveillance  and  the  monitoring  of  budgetary  developments.  A  key  element  in  ensuring  the  quality  of 

fiscal  data  is  transparency,  which  must  entail  the  regular  public  availability  of  such  data.  However,  the 

draft  law  does  not  cover  all  the  requirements  under  Directive 2011/85/EU,  such  as  the  obligation  to 

publish cash-based fiscal data (or the equivalent figure from public accounting if cash-based data are not 

13  
14  
15  

OJ L 198, 30.7.2010, p. 1. 
OJ L 87, 31.3.2009, p. 164. 
This  includes  the  Treaty  on  Stability,  Coordination  and  Governance  in  the  Economic  and  Monetary  Union,  which 
Bulgaria signed on 2 March 2012, as well as the six legislation changes to strengthen the Union economic governance 
framework (the so-called ‘six-pack’) which entered into force on 13 December 2011, including Directive 2011/85/EU. 

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available)  on  a  monthly basis  for  central  government,  state  government  and  social  security sub-sectors, 

and on a quarterly basis for the local government  sub-sector. Moreover, for fiscal transparency reasons 

and  to  ensure  compliance  with  the  relevant  Union  legislation,  the  ECB  suggests  that  the  draft  law  also 

obliges  the  government  to  publish  a  detailed  reconciliation  table  showing  the  methodology  of 

transmission between cash-based data and data based on ESA 95 as required under Directive 2011/85/EU. 

7. 

Government deposits and liquidity management 

Article  154(22)  of  the  draft  law  allows  the  Minister  for  Finance  to  manage  the  government  liquidity, 

including  the  single  account,  without  any  prior  coordination  with  BNB,  except  for  general  guidelines 

about  the  government  liquidity  management.  The  ECB  notes  that  the  management  of  the  government 

liquidity may interfere with the smooth implementation of monetary policy by BNB. Indeed, placing the 

government liquidity either with BNB or with the Bulgarian banking system may trigger large liquidity 

effects for the economy which are equivalent to monetary policy operations. As a result, the lack of any 

prior coordination with the BNB regarding the management of the government liquidity may jeopardise 

the smooth fulfillment of the monetary policy mandate of the BNB, which is a deficiency that should be 

addressed in the draft law. 

This opinion will be published on the ECB’s website.  

Done at Frankfurt am Main, 24 October 2012. 

[signed] 

The President of the ECB 

Mario DRAGHI 

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