Opinion of the European Central Bank of 17 April 2019 on participation in the Single Resolution Mechanism (CON/2019/16) 
Date: 2019-04-16
Institutions: European Central Bank
Subjects: banking supervision, company in difficulties, credit guarantee, credit institution, financial stability, financial supervision, investment company

EN 

ECB-PUBLIC 

OPINION OF THE EUROPEAN CENTRAL BANK 

of 17 April 2019  

on participation in the Single Resolution Mechanism  

(CON/2019/16) 

Introduction and legal basis 

On 20 March 2019 the European Central Bank (ECB) received a request from the Bulgarian Minister of 

Finance  for  an  opinion  on  a  draft  law  amending  and  supplementing  the  Law  on  the  recovery  and 

resolution  of  credit  institutions  and  investment  firms,  the  Law  on  Българска  народна  банка  (Bulgarian 

National Bank) and the Law on the bank deposit guarantee (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)), rules 

applicable to financial institutions insofar as they materially influence the stability  of financial institutions 

and markets and 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 

The draft law introduces provisions which the consulting authority considers necessary in relation to the 

application  in  Bulgaria  of  Regulation  (EU)  No  806/2014  of  the  European  Parliament  and  of  the  Council 
(hereinafter the ‘SRM Regulation’)2. 

1.1.  Competences of the national resolution authorities and the Single Resolution Board 

The draft law establishes the competences of BNB as the national resolution authority responsible 
for the resolution of credit institutions3 and of the Financial Supervision Commission (FSC) as the 

national resolution authority responsible for the resolution of investment firms within the meaning of 
the SRM Regulation4. The draft law provides that, when performing their resolution tasks, BNB and 

the  FSC  must  comply  with  the  guidelines  and  general  directions  issued  by  the  Single  Resolution 

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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). 

Regulation (EU) No 806/2014 of the European Parliament and of the Council of 15 July 2014 establishing uniform 
rules and a uniform procedure for the resolution of credit institutions and certain investment firms in the framework of 
a Single Resolution Mechanism and a Single Resolution Fund and amending Regulation (EU) No 1093/2010 (OJ L 
225, 30.7.2014, p. 1). 
See paragraph 1 of the draft law. 

See paragraph 3 of the draft law. 

 
 
 
 
 
                                                 
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Board  (SRB)5  and  take  the  necessary  actions  to  implement  the  SRB’s  decisions  pursuant  to  the 

SRM Regulation. 

1.2.  Cooperation between national and Union authorities in the context of resolution 

The  draft  law  further  specifies  that,  in  the  framework  of  the  SRM  Regulation,  BNB  and  the  FSC 

must cooperate with the SRB, the European Commission, the Council of the European Union, the 
ECB, national resolution authorities and national competent authorities6. The draft law also amends 
the Law on BNB to enable BNB to exchange information with the SRB7. 

1.3.  National financing arrangements 

The  draft  law  reorganises  the  existing  national  resolution  financing  arrangements.  It  is  envisaged 

that  the  existing  national  resolution  fund  for  the  resolution  of  credit  institutions  (the  ‘Bank 

Resolution  Fund’  (BRF)),  which  is  currently  managed  by  the  Bulgarian  Deposit  Insurance  Fund 
(BDIF),  will  in  the  future  be  managed  by  BNB8.  Within  the  BRF,  two  sub-funds  would  be 

established – one sub-fund for the collection of contributions in accordance with Articles 69 to 71 of 

the SRM Regulation and one sub-fund with the objective of funding the resolution of branches of 

third-country credit institutions. The draft law provides that the available funds in the BRF would be 
held in a BNB account and invested in accordance with the Law on BNB9. The costs of managing 

the  BRF  will  be  financed  by  the  fees  collected  in  connection  with  BNB’s  resolution  function  and 

pursuant to Article 59a of the Law on BNB. 

The draft law also provides for the split of the existing national resolution fund for the resolution of 

investment firms (the ‘Investment Firm Resolution Fund’ (IFRF)) into two sub-funds: one sub-fund 

for the collection of contributions in accordance with Articles 69 to 71 of the SRM Regulation and 

one sub-fund with the objective of funding the resolution of investment firms which fall outside the 
scope of the SRM Regulation as well as branches of third-country investment firms10. BNB will be 
the depositary of the IFRF11. 

1.4.  Contributions to the Single Resolution Fund 

The draft law mandates BNB and the FSC to notify the relevant credit institutions and investment 

firms of an SRB notification of the amount of contributions due in accordance with Articles 69 to 71 
of  the  SRM  Regulation12.  BNB  and  the  FSC  will  be  required  to  promptly  transfer  to  the  Single 

Resolution  Fund  (SRF)  the  contributions  collected  from  such  credit  institutions  and  investment 

firms. The draft law also aims to facilitate the gradual transfer of the financial means of the BRF to 
the  SRF13.  In  addition,  the  draft  law  clarifies  the  rules  for  the  calculation  and  collection  of 

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See paragraphs 2 and 4 of the draft law. 
See paragraph 5 of the draft law. 
See paragraph 57 of the draft law. 

See paragraph 39 of the draft law. 
See paragraph 41 of the draft law. 
See paragraph 40 of the draft law. 

See paragraph 43 of the draft law. 
See paragraph 46 of the draft law. 

See paragraph 55 of the draft law. 

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contributions  from  branches  of  third-country  credit  institutions,  investment  firms  which  fall  outside 
the scope of the SRM Regulation as well as branches of third-country investment firms14. 

1.5.  Competences relating to the application of resolution tools 

To complement the proposed transfer of the management of the BRF from the BDIF to BNB, the 

draft  law  seeks  to  transfer  the  BDIF’s  functions  with  regard  to  the  establishment  of  bridge 

institutions  and  asset  management  vehicles  to  BNB.  In  particular,  BNB  is  now  empowered  to 
establish  a  bridge  bank15,  a  bridge  financial  holding  company16  and  an  asset  management 
vehicle17. In addition, the draft law specifies that the capital of those entities may be fully or partially 
financed by the SRF or the BRF18. Moreover, eligible liabilities may also be converted into ordinary 
shares in order to constitute the capital of a bridge institution19. 

1.6.  Exchange of information in the period leading up to the establishment of close cooperation 

Finally  the  draft  law  aims  to  ensure  the  appropriate  exchange  of  information  for  the  purposes  of 

establishing close cooperation between the ECB and BNB and in relation to the implementation of 
the Agreement on the transfer and mutualisation of contributions to the Single Resolution Fund20. 
To  this  end  the  draft  law  introduces  a  transitional  provision  which  permits  the  exchange  of 

information, on the one hand, between BNB and the SRB and, on the other hand, between credit 

institutions  established in  Bulgaria and  the SRB. This transitional  provision  would apply  as  of  the 

date  of  publication  in  the  State  Gazette  and  until  the  date  of  application  of  an  ECB  decision 

establishing close cooperation between the ECB and BNB. 

2. 

General observations 

2.1  With  regard  to  the  proposed  amendments  to  decision-making  and  governance  of  the  national 

resolution financing arrangements, the resolution decision-making process should allow for timely 

and efficient decision-making, if necessary, within a very short time, such as a few days or, where 
necessary, a few hours21. 

2.2  The ECB underlines that this opinion is without prejudice to the ongoing assessment of the request 

filed on 18 July 2018 by the Republic of Bulgaria to establish close cooperation between the ECB 

and  BNB,  in  line  with  the  existing  procedures  established  under  Article  7  of  Council  Regulation 
(EU) No 1024/201322. 

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See paragraphs 43-45 of the draft law. 
See paragraph 17 of the draft law. 
See paragraph 19 of the draft law. 
See paragraph 20 of the draft law. 
See paragraphs 17, 19 and 20 of the draft law. 

See paragraph 26 of the draft law. 
See paragraph 53 of the draft law. 

See  paragraph  1.3  of  ECB  Opinion  CON/2013/76.  All  ECB  opinions  are  available  on  the  ECB’s  website  at 
www.ecb.europa.eu. 
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). 

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3. 

Specific observations 

3.1  BNB as a resolution authority 

BNB  is  already  the  national  resolution  authority  competent  for  the  resolution  planning  and 

resolution of credit institutions. It also has the relevant resolution powers necessary to fulfil these 

functions.  The  ECB  understands  that, under  the  existing  law,  BNB  is  already  competent  to  apply 

both  the  bridge  institution  tool  and  the  asset  separation  tool.  In  particular,  BNB  is  the  competent 

resolution authority to decide on a transfer to a bridge institution or an asset management vehicle 
of instruments of ownership, assets, rights and liabilities23. BNB is also competent to approve the 

operation of a bridge bank, a bridge financial holding company, or an asset management vehicle, 
upon proposal of the BDIF24, while the capital of those entities is provided by the BRF25.  

3.2  Complementing existing resolution tasks 

The proposed transfer to BNB of the existing competences of the BDIF regarding the establishment 

and incorporation of bridge institutions and asset management vehicles does not confer genuinely 

new  tasks  on  BNB.  Rather,  BNB’s  proposed  new  administrative  competences  in  relation  to  the 

management  of  the  BRF  complement  BNB’s  existing  resolution  tasks.  The  draft  law  specifies 

certain new administrative competences that BNB would exercise when carrying out its tasks as a 

resolution authority.  

3.3  Compliance with the monetary financing prohibition 

Since  the  draft  law  only  envisages  complementing  BNB’s  existing  resolution  tasks,  it  is  not 

necessary to assess whether the conferral of new tasks on a national central bank complies with 

the  prohibition  of  monetary  financing  under  the  Treaty.  The  ECB  understands  that  BNB  will 

manage, but not own, the BRF. The role of a resolution fund that is managed within a central bank 

must  remain  consistent  under  all  circumstances  with  the  prohibition  on  monetary  financing  under 
Article  123  of  the  Treaty,  as  supplemented  by  Council  Regulation  (EC)  No  3603/9326,  which 

prohibits, inter alia, any financing by a central bank of the public sector’s obligations vis-à-vis third 
parties27. While administrative resolution tasks may be considered to be central banking tasks, the 

discharge  of  these  tasks  by  central  banks  may  not  extend  to  the  financing  of  resolution  funds  or 
other financial arrangements related to resolution proceedings as these are governmental tasks28. 

The provision of such financing would constitute a government task in breach of the prohibition of 
monetary financing under the Treaty29. Where  a resolution fund established within  a central bank 

holds capital of a bridge institution or an asset management vehicle, it should be clarified, for the 

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See Articles 60(1) and 64(1) of the Law on the recovery and resolution of credit institutions and investment firms. 
See, for example, Articles 61(2), 63(2) and 64(5) of the Law on the recovery and resolution of credit institutions and 
investment firms. 
See,  for  example,  Articles  61(1),  63(1)  and  64(3)  of  the  Law  on  recovery  and  resolution  of  credit  institutions  and 
investment firms. 
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). 

See paragraph 3.1.2 of Opinion CON/2015/35. 
See paragraph 2.1.2 of ECB Opinion CON/2019/13 and paragraph 3.2.3 of Opinion CON/2016/28. 

See paragraph 3.1.1 of Opinion CON/2015/35 and paragraph 3.1.4 of Opinion CON/2015/22. 

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avoidance of doubt, that the central bank will not employ its resources, other than those collected in 
the resolution fund, to assume or finance any obligation of these entities30.  

3.4  Financial independence 

The  principle  of  financial  independence  requires  NCBs  to  have  sufficient  means  to  carry  out  not 

only their ESCB-related tasks from an operational and financial point of view, but also their national 

tasks.  For  that  reason,  it  should  be  ensured  that  if  a  resolution  fund  established  within  BNB 

becomes the owner of a bridge institution or an asset management vehicle, sufficient financial and 
human  resources  are  provided  to  address  the  operational  burden  associated  with  it31.  The  ECB 

notes that the draft law provides that the costs of managing the BRF will be financed by the fees 

collected in connection with BNB’s resolution function. 

3.5 

Liability of BNB 

The ECB notes that the BNB, the members of the BNB Governing Council, and the BNB staff are 

not held liable for acts or omissions in the course of discharging their duties under the Law on the 
recovery and resolution of credit institutions and investment firms, unless they acted intentionally32. 

The  ECB  understands  that  this  provision  applies  also  in  relation  to  the  draft  law  and  the  BNB’s 

tasks of managing the BRF and acting as the depositary of the IFRF. 

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

Done at Frankfurt am Main, 17 April 2019. 

[signed] 

The President of the ECB 

Mario DRAGHI 

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See  paragraph  3.1.2  of  Opinion  CON/2015/35  and  paragraph  3.4.2  of  Opinion  CON/2015/25.  See  also  ECB 
Convergence Report 2018, point 2.2.5.1. 
See paragraph 3.1.2 of Opinion CON/2015/35. 

See Article 5(3) of the Law on the recovery and resolution of credit institutions and investment firms. 

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