Opinion of the European Central Bank of 22 December 2020 on the interaction between the European Central Bank and the Bulgarian National Bank within the framework of close cooperation in the Single Supervisory Mechanism (CON/2020/36)
OPINION OF THE EUROPEAN CENTRAL BANK of 22 December 2020 on the interaction between the European Central Bank and the Bulgarian National Bank within the framework of close cooperation in the Single Supervisory Mechanism (CON/2020/36) Introduction and legal basis
On 10 December 2020 the European Central Bank (ECB) received a request from the Bulgarian Minister of Finance for an opinion on a draft law amending the Law on credit institutions (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 sixth indent of Article 2(1) of Council Decision 98/415/EC , as the draft law relates to rules applicable to financial institutions insofar as they materially influence the stability of financial institutions and markets and the ECB’s tasks 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 aims to ensure the smooth interaction between the ECB and Българска народна банка (BNB, Bulgarian National Bank) within the framework of close cooperation in the Single Supervisory Mechanism (SSM). The draft law proposes to amend the Law on credit institutions in respect of, inter alia, the following matters. 1.1 Right to be heard in supervisory procedures and notification of BNB decisions The draft law proposes to explicitly provide that credit institutions will have the right to be heard on draft BNB decisions implementing ECB instructions in relation to significant institutions and on draft BNB decisions in relation to less significant credit institutions . The hearing period provided for is 14 days from the date of notification, except in cases of the issue or revocation of a credit institution’s licence, the acquisition of a qualifying holding, or in special circumstances, the period will be three working days. These deadlines can be disapplied in circumstances where an urgent decision appears necessary in order to prevent significant damage to the financial system . The
draft law provides further that a BNB decision may be notified to its addressees by email or by fax, if the addressees have provided these details to BNB . 1.2 Decisions with conditions and obligations The draft law provides that BNB decisions adopted to implement ECB instructions and which grant authorisations, approvals or rights, may define conditions, upon fulfilment of which the decision will come into effect, and may also impose additional obligations and make recommendations . 1.3 Duty to provide information The draft law provides that credit institutions and, where applicable, financial holding companies, mixed financial holding companies and their shareholders or partners, shall be under a duty to provide BNB with all necessary documents, information and assistance required for banking supervision purposes and refrain from any actions that could hinder banking supervision . 1.4 Deadlines for the exercise of specific supervisory powers The draft law provides that BNB shall perform its assessment and decide within one month of the receipt of notification from the credit institution (i) whether to approve or reject any proposed amendments to a credit institution’s statute and (ii) whether to object to the proposed appointment of an independent auditor . 1.5 Administrative penalties The draft law provides that persons who obstruct BNB, the Deputy Governor who heads the Banking Supervision Department or employees duly authorised by them from exercising their supervisory powers shall be subject to an administrative penalty .
2. Observations
2.1 Close cooperation between the ECB and BNB started on 1 October 2020 . The ECB welcomes the proposed amendments, which aim to align the national legal framework on the right to be heard with the legal framework of the SSM, as well as the clarification that BNB decisions implementing ECB instructions may be subject to conditions and obligations and may include recommendations. The ECB also welcomes the extension of certain deadlines, which would facilitate the cooperation between the ECB and BNB in the adoption of the respective decisions in relation to significant credit institutions . 2.2 As previously noted, the ECB understands that the provisions under the draft law will be read in accordance with the other provisions of the Law on credit institutions, so that the exercise of prudential supervision over credit institutions established in Bulgaria will take place under the
This opinion will be published on EUR-Lex.
Done at Frankfurt am Main, 22 December 2020.
[signed]
The President of the ECB
Christine LAGARDE
Fotnoter
- 1 Закон за изменение и допълнение на Закона за кредитните институции. 2 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). 3 Law on credit institutions (Закон за кредитните институции, обн. ДВ, бр. 59 от 21.07.2006 г.). 4 Proposed new Article 121b(6) of the Law on credit institutions. 5 Proposed new Article 151a(1) of the Law on credit institutions. 6 Proposed new Article 121b(7) and Article 151a(2) of the Law on credit institutions.
- 7 Proposed amended Article 151(7) of the Law on credit institutions. 8 Proposed amended Article 121b(4) of the Law on credit institutions. 9 Proposed new Article 80(8) of the Law on credit institutions. 10 Proposed amended Article 71(5) of the Law on credit institutions. 11 Proposed amended Article 76(6) of the Law on credit institutions. 12 Proposed new Article 152(9) of the Law on credit institutions. 13 Decision (EU) 2020/1015 of the European Central Bank of 24 June 2020 on the establishment of close cooperation between the European Central Bank and Българска народна банка (Bulgarian National Bank) (ECB/2020/30) (OJ L 224I, 13.7.2020, p. 1). 14 See paragraphs 2.3 to 2.5 of this opinion.
- 1516 framework provided for in Council Regulation (EU) No 1024/2013 . 2.3 The draft law extends the deadline for the supervisory approval of proposed amendments to the statute of a credit institution. The extension of the deadline – from ten calendar days to one month from the date of notification of the proposed changes – is welcomed by the ECB, as it provides the competent authority with more time to perform its assessment and carry out its decision-making processes. Under the draft law, the issuance of a supervisory decision is required in the case of both a positive and of a negative assessment of the proposed amendments. However, consideration could be given to whether that requirement for explicit approval (in the form of a supervisory decision) could instead be formulated as an ex-ante notification requirement with the possibility for the competent authority to object within a specified timeframe, so that if it does not do so (meaning that the assessment is positive), the proposed amendments are deemed to be approved. This would seem to be appropriate, as otherwise the requirement under national law to issue a specific supervisory decision in the case of a positive assessment could increase the time required for decision-making in the context of close cooperation. 2.4 Under Article 76(4) of the Law on Credit Institutions each bank shall coordinate its choice of auditors with BNB in advance of the auditors’ appointment. BNB may object to the choice of auditors within a specific deadline, and if it doesn’t object the proposal for the choice of auditors is deemed to have been agreed with BNB. The extension of the deadline for objection from 14 calendar days to one month from the date of notification of the request is welcomed, as it provides the competent authority with more time to perform its assessment and carry out its decision-making processes. 2.5 As regards the one month deadlines provided for in the draft law, the ECB notes that the Bulgarian authorities may consider exploring the possibility of whether the period of one month could either be stipulated as a minimum timeframe or be further extended – if and where deemed appropriate given the regulatory framework – to take into account the specificities of close cooperation in view of the time needed for collaboration between the ECB and BNB in the decision-making process.
- 15 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). 16 Paragraph 4.4 of Opinion CON/2020/10. All ECB opinions are published on EUR-Lex.