Opinion of the European Central Bank of 11 January 2021 on the implementation of the recommendations of the convergence reports into the Law on Българска народна банка (Bulgarian National Bank) (CON/2021/2)

OPINION OF THE EUROPEAN CENTRAL BANK of 11 January 2021 on the implementation of the recommendations of the convergence reports into the Law on Българска народна банка (Bulgarian National Bank) (CON/2021/2) Introduction and legal basis

On 10 December 2020 the European Central Bank (ECB) received a request from the Bulgarian Minister for Finance for an opinion on a draft law amending the Law on credit institutions and other laws (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 , as the draft law relates to Българска народна банка (BNB, Bulgarian National Bank). 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 address certain issues identified in the 2020 Convergence Reports of the ECB and the European Commission with regard to the independence of BNB and the prohibition of monetary financing under Article 123 of the Treaty. In 3 4 this respect, the draft law proposes to amend the Law on credit institutions , the Law on BNB and the Law on counter-corruption and unlawfully acquired assets forfeiture (hereinafter the ‘Law on counter-corruption’) in respect of, inter alia, the matters set out below. 1.1 Grounds for removal from office in case of a conflict of interest The draft law proposes to amend Article 80(1) of the Law on counter-corruption in order to provide that the ascertainment of a conflict of interest in accordance with that Law will be a ground for removal from office, unless otherwise provided for in the Constitution or the Treaties of the European Union and their protocols.

The draft law proposes to specify in the Law on credit institutions that BNB will not be liable for damages relating to the information stored in the central credit register and the bank account register . 1.3 Cooperation between BNB and the Council of Ministers The draft law proposes to repeal the provision of Article 3 of the Law on BNB which currently provides that in the formulation of the general outlines of the monetary policy, BNB and the Council of Ministers shall inform each other. 1.4 Independence of the members of the BNB Governing Council The draft law proposes that Article 13(1) of the Law on BNB be amended to provide that the oath to be taken by the Governor, the Deputy Governors and the other three members of the Governing Council when entering into office should refer to their contribution to the ‘independent’ performance of the BNB functions.

2. General observations

2.1 The ECB welcomes the draft law’s efforts to achieve the required level of legal convergence by reference to the recommendations for Bulgaria contained in the 2020 Convergence Reports of the ECB and the Commission. 2.2 The ECB notes that the compatibility of Bulgarian legislation – including the Law on BNB and the Law on counter-corruption – with the Treaties and the Statute of the European System of Central Banks and of the European Central Bank (hereinafter the ‘Statute of the ESCB’) will be assessed in the ECB’s next convergence report, as required by Article 131 of the Treaty.

3. Specific observations

3.1 Grounds for removal from office in case of a conflict of interest In accordance with Article 12 of the Law on BNB, the Governor and the three Deputy Governors are appointed by the National Assembly, while the other three members of BNB’s Governing Council are appointed by the President of the Republic. Article 14(1) of the Law on BNB provides that the appointing authority may remove a member of the Governing Council from office if one of the grounds it lists for removal from office is established. The ECB therefore understands that the competence to take a decision to remove a member of BNB’s Governing Council from office is vested solely in the appointing authority: either the National Assembly or the President of the Republic. In accordance with Article 14(1) of the Law on BNB the grounds for removal are met where: (i) the member no longer fulfils the conditions required for the performance of his duties or (ii) he has been found guilty of serious misconduct.

However, the Law on counter-corruption also applies to the Governor, the Deputy Governors and the other members of the Governing Council of BNB as senior public office holders . This Law on counter-corruption provides that the Counter-Corruption and Unlawfully Acquired Assets Forfeiture Commission may establish by means of a decision the existence of a conflict of interest with regard 9 10 to senior public office holders . As a consequence of such a decision , the respective senior public office holder may be removed from office in accordance with Article 80(1) of the Law on countercorruption. Against this background, the Law on counter-corruption establishes a ground for relieving from office that is in addition to the two grounds contained in Article 14.2 of the Statute of the ESCB. Therefore, the ECB has noted in its Convergence Report that the Law on counter-corruption is incompatible with the Treaty and the Statute of the ESCB and needs to be brought into line with them . According to Article 14.2 of the Statute of the ESCB, a Governor may only be relieved from office on either of the two grounds contained in that Article . As regards the other members of the decision-making bodies of national central banks (NCBs), the same rules for the security of tenure and grounds for relieving Governors from office also apply, safeguarding the personal independence of those persons. The provisions of Article 14.2 of the Statute of the ESCB are not restricted to the security of tenure of Governors, and Article 130 of the Treaty and Article 7 of the Statute of the ESCB refer to ‘members of the decision-making bodies’ of NCBs rather than to Governors specifically. This is legally required, in particular, when a Governor is a ‘first among equals’ with colleagues with equivalent voting rights or where such other members are involved in the performance of ESCBrelated tasks . Against this backdrop, the ECB understands that the intention of the proposed amendment to Article 80(1) of the Law on counter-corruption is to ensure that the ascertainment of a conflict of interest in accordance with that Law would not be a ground for removal from office of the Governor and the other members of the Governing Council of BNB, because this would be contrary to the Treaty and the Statute of the ESCB. However, for the sake of ensuring legal certainty and transparency, it is suggested to explicitly clarify that the provision of Article 80(1) of the Law on counter-corruption shall not apply to the Governor, the Deputy Governors and the other members of the Governing Council of BNB, instead of implicitly reaching this result by means of a general cross-reference to the EU Treaties and their protocols. 3.2 BNB liability in relation to the central credit register and the bank account register The ECB welcomes the waiver of liability for BNB in relation to the operation of the central credit register and the bank account register. The ECB understands that, instead of BNB, the State would be liable for damages resulting from the operation of the two registers in accordance with the general regime for State liability. 3.3 Cooperation between BNB and the Council of Ministers

The ECB notes that the consulting authority proposes to repeal the provision of Article 3 of the Law on BNB, which currently provides that in the formulation of the general outlines of the monetary policy, BNB and the Council of Ministers shall inform each other. The ECB understands that this proposal aims to implement the recommendations of the Commission’s Convergence Report with regard to central bank independence . For its part, however, the ECB would not object to maintaining Article 3 of the Law on BNB even if in a revised form, in order to implement the necessary safeguards for central bank independence. Dialogue between an NCB and third parties including the Government, even when based on statutory obligations to provide information and exchange views, is indeed compatible with central bank independence, provided that (i) this does not result in interference with the independence of the members of the NCB’s decision-making bodies; (ii) the special status of Governors in their capacity as members of the ECB’s decision-making bodies is fully respected; and (iii) confidentiality requirements resulting from the Statute of the ESCB are respected . 3.4 Independence of the members of the BNB Governing Council The ECB understands that the proposed amendment to Article 13(1) of the Law on BNB aims to implement the recommendations of the Commission’s Convergence Report with regard to central bank independence, henceforth requiring that the oath to be sworn by the Governor, Deputy Governors and other members of the Governing Council of BNB before the National Assembly and the President would make reference to their contribution to the independent performance of BNB’s functions . The ECB welcomes this clarification.

This opinion will be published on EUR-Lex.

Done at Frankfurt am Main, 11 January 2021.

[signed]

The President of the ECB

Christine LAGARDE