On 25 January 1879 the Russian Imperial Commissar in Bulgaria, Knyaz Alexander Dondukov-Korsakov, approved the Charter of the Bulgarian National Bank. On 4 April 1879 the first Bulgarian National Bank Governor was appointed, on 23 May the Bank was officially opened, and on 6 June it carried out its first banking operation. The Law on the right to mint coins in the Principality was passed in 1880, and it instituted the Bulgarian national currency – the Bulgarian Lev. In the next year Bulgaria minted its first coins of 2, 5 and 10 stotinki.

Initially the Bulgarian National Bank was a state-owned central bank, subject to the oversight of the Minister of Finance, which serviced the state budget and the cash activities of the Government and carried out banking transactions typical of a commercial bank, without having the right to print or put in circulation banknotes. The Law on the foundation of the Bulgarian National Bank and the new Charter, both passed in 1885, reorganised the Bank, expanding its autonomy and empowering it to print banknotes. Later in same year the Bank issued the first Bulgarian banknotes.

By the outbreak of the Balkan war (1912) the Bulgarian National Bank gained much experience as a bank of issue and strengthened its independence. Apart from being the major lending centre in Bulgaria, it became the regulator of the monetary system, clearing the cash circulation of foreign coins and coping with the serious money crisis in Bulgaria in the late 19th century and with the consequences of the European money crisis in the early years of the 20th century.

During the wars (1912–1918) the Bulgarian National Bank was forced to almost limitlessly lend to the Government and increase the note issue and the amount of notes in circulation. The Bulgarian Lev came out of the wars strongly depreciated, and during the decade afterwards the Bank made efforts to restore its value. As a result, in 1928, with the support of the Financial Committee of the League of Nations, Bulgaria was granted a big loan (called ‘Stabilisation Loan’) intended to stabilise the Lev; to reinforce the capital stock of the Bulgarian National Bank; and to liquidate the Government’s debt to the Bank. Two new laws were passed for the same purpose — the Law on the Bulgarian National Bank, which made the most profound institutional changes to the Bank (it became a real central bank of issue free of any activities untypical of this type of bank), and the Law on the stabilisation of the Lev and on coinage, which established a gold standard in Bulgaria whereby 92 Leva equalled 1 gram of pure gold. All these steps supported the Bank’s business during the years of the Great Depression (1929–1933). From the mid-1930s till Bulgaria entered the Second World War in 1941 the Bulgarian National Bank went through a revival. At that time the building of the Bank was constructed, which houses it to the present day.

During the Second World War, the Bulgarian National Bank was compelled again to lend to the Government and deal with the depreciation of the Lev. The 1947 Law on Banks carried out a drastic reform: private banks were nationalised and the banking system was transformed on the Soviet model and thus operated until the late 1980s. The Bulgarian National Bank was entrusted to provide all financial services to the newly-created overcentralised planned economy. The Bank too was obliged to directly lend to the Government and the economy, being directly subordinated to the Council of Ministers and the Minister of Finance.

In 1952 the Bulgarian Mint was set up and it started minting circulation and commemorative coins.

The return of the Bulgarian banking system to the market economy principles and of the Bulgarian National Bank to the independent central bank principles became possible only in 1991 when two basic laws came into effect — the Commerce Law, which brought back the legal foundations of commercial banking, and the new Law on the Bulgarian National Bank, which restored the Bank’s autonomy and gave it the responsibility for supervising banks. In 1997 another Law on the Bulgarian National Bank superseded the previous one; it reorganised the monetary system, and from 1 July a currency board arrangement was put in place. At first the Bulgarian Lev was pegged to the Deutsche Mark, and from 1999 — to the Euro, at the rate of 1.95583 Leva for 1 Euro. Later in the same year the Bulgarian Lev was re-denominated.

In 1998 the Bulgarian National Bank Printing Works was opened for business and it began the production of banknotes and bonds with a very high level of security.

In 2005 amendments were made to the Law on the Bulgarian National Bank, which ensured the institutional, functional, financial and personal independence of the Bulgarian National Bank, changed the core purpose of the Bank, and expressly prohibited the central bank from providing funding to public institutions.

On 1 January 2007 Bulgaria joined the European Union, and ever since the Bulgarian National Bank has been a member of the European System of Central Banks.

The Bulgarian National Bank is one of the oldest national institutions established right after the restoration of the Bulgarian state, on January 25, 1879, and on 6 of June of the same year the first banking operation was conducted.

The Bulgarian National Bank is an independent issuing institution of the State reporting to the National Assembly. It plays a key role in the Bulgarian economy and takes care of maintaining the stability of the Bulgarian currency, and of strengthening and development of the banking and credit system in the country.

The Bulgarian National Bank’s independence is guaranteed by its organic Law (LBNB), and by the Treaty on the functioning of the European Union. Since January 1, 2007 the bank is a full member of the European System of Central Banks and actively participates in the decision making process in the area of banking and finance in the European Union. The Bulgarian National Bank Governor is a member of the General Council of the European Central Bank.

The Bulgarian National Bank maintains the stability of the national currency by means of ensuring:

• full coverage of the Bank’s pecuniary obligations with highly liquid assets;
• unrestricted exchange between the Bulgarian Lev and the reserve currency in the country at a fixed official exchange rate as laid down in LBNB;
• the necessary issuance of banknotes and coins in the country;

The Bulgarian National Bank regulates and controls the banking system to safeguard investors’ interests:

• strict and effective banking supervision;
• functioning as lender of last resort in the cases provided for by law;
• support for the normal functioning and development of financial markets;

Bulgarian National Bank’s activities are based on the following values:

• commitment to the public interests;
• independence in formulating and pursuing its policy;
• impartiality in decision making;
• commitment to professionalism;
• cooperation and exchange of information among the Bank’s structural units;
• harmonization of the legal framework, tasks and activities within the European System of Central Banks;

Also, the Bulgarian National Bank ensures the functioning and development of efficient payment systems and performs a fiscal agency function and acts as depository of the state. The Bulgarian National Bank works for the strengthening of the banking and financial system of EU by means of participating in committees and working groups at the European Central Bank, the European Commission and the EU Council.

From 1997 Bulgaria’s is under a currency board arrangement — a monetary policy regime ensuring the necessary price stability for the economy by means of assigning the responsibility of its achievement to a legally and effectively independent central bank. The Bulgarian National Bank’s pecuniary obligations include all banknotes and coins in circulation issued by it, as well as all balances on Bulgarian National Bank accounts with the exception of the International Monetary Fund (IMF) accounts. A specific feature of the Bulgarian currency board is that it ensures coverage to banknotes, coins and deposits (the Government’s deposit and the reserves of commercial banks). The Bulgarian National Bank has also created a strong system of banking regulation and supervision.

The basic rule of this arrangement is restricting the amount of reserve currency issue to the amount of the foreign currency reserves held. The Bulgarian variant allows for financing of commercial banks up to the amount of the net foreign currency reserve, however only at a liquidity risk for the overall financial system and following strict requirements for the type and quality of collaterals. The Bulgarian National Bank may not, in any form whatsoever, lend to the State other than against purchases of IMF special drawing rights. No possibility is allowed for including in the reserves of securities issued or guaranteed by the State. These may only be used as pledge on lending in line with the lender-of-last-resort function.

Maintaining the currency board until Bulgaria’s entry into the euro area is a main political priority.

The European System of Central Banks (ESCB) is an organisation established in line with the Treaty establishing the European Community and governed by the ESCB Statute. It comprises the European Central Bank (ECB) and the central banks of all EU member states. Since Bulgaria’s accession to EU on 1 January 2007, the Bulgarian National Bank is part of the ESCB and the Bulgarian National Bank Governor is a member of the ECB Governing Council, while bank experts are actively involved in the work of committees and working groups at the ECB/ESCB.

The increased complexity of tasks and higher responsibilities of the Bank as an ESCB member raise its role as a primary factor of ensuring a stable and predictable economic and financial policy in the country.

Bulgarian National Bank’s share in the ECB capital amounts to EUR 50.833 million. euro, and its paid-in capital is EUR 3.561 million.

Useful links

Currency of Bulgaria:

Bulgarian lev

List of Central Banks:

Central Banks

Official website of Bulgarian National Bank:

www.bnb.bg

Bulgarian National Bank Printing Works:

www.bnbprint.com

Bulgarian Mint:

www.mint.bg

European Central Bank:

www.ecb.int