BulgarianBulgarian NationalNational BankBank ANNUALANNUAL REPORTREPORT •• 20092009 Published by the Bulgarian National Bank 1, Knyaz Alexander I Square, 1000 Sofia Tel.: (+359 2) 9145 1351, 9145 1209, 9145 1231, 9145 1978 Fax: (+359 2) 980 2425, 980 6493 Printed in the BNB Printing Centre © Bulgarian National Bank, 2010 ISSN 1313-1494 Materials and information in the BNB 2009 Annual Report may be quoted or reproduced without further permission. Due acknowledgment is requested. Website: www.bnb.bg The cover shows an engraving of the BNB building from the 1938 banknote with a nominal value of 5000 levs. Honourable Chairman of the National Assembly, Honourable People’s Representatives, Under the provisions of Article 1, paragraph 2 and Article 51 of the Law on the Bulgarian National Bank, I have the honour of presenting the Bank’s 2009 Annual Report. Ivan Iskrov Governor of the Bulgarian National Bank BNB Governing Council BNB Governing Sitting from left to right: Kalin Hristov, Ivan Iskrov, Rumen Simeonov, Dimitar Kostov Standing from left to right: Oleg Nedyalkov, Penka Kratunova, Statty Stattev Governing Council Ivan Iskrov Governor Dimitar Kostov Deputy Governor Banking Department Rumen Simeonov Deputy Governor Banking Supervision Department Kalin Hristov* Deputy Governor Issue Department Penka Kratunova Statty Stattev Oleg Nedyalkov * As of 23 October 2009 Kalin Hristov is a Deputy Governor heading the Issue Department. Until 22 October 2009 Tsvetan Manchev was a Deputy Governor heading the Issue Department. Organisational Structure of the BNB (as of 1 March 2010) GOVERNING COUNCIL Chief Auditor GOVERNOR Ivan Iskrov DEPUTY GOVERNOR DEPUTY GOVERNOR DEPUTY GOVERNOR STRUCTURAL UNITS Kalin Hristov Dimitar Kostov Rumen Simeonov GENERAL SECRETARY SUBORDINATED TO Petko Krastev THE GOVERNOR Issue Department Banking Fiscal Services Banking Supervision Department Department Department Legal Services Financial Stability Treasury Bank Policy and Administration Procurement Directorate Directorate Directorate Directorate Directorate Legal Risk Analysis Statistics Supervisory Policy Information Systems Directorate and Control Directorate Directorate Directorate Directorate International Relations Issue and Cash General Accounting Special Supervision Administrative Directorate Directorate Directorate Directorate Directorate Government and Issuing Policy Macro-prudential Capital Investment, Main- Human Resources Government Guaranteed Management and Control Analysis and Strategy tenance and Transport Directorate Debts Depository Directorate Directorate Directorate Directorate Economic Research Projections and Credit Institutions Public Relations and Projections Management of State Supervision Directorate Directorate Budget Cash Flows Directorate Directorate Banking Security and Protection of Classified Information Directorate In 2009 the Bulgarian National Bank – one of the first and oldest institutions dating back to the Bulgarian National Revival period – marked its 130 anniversary. With a view to its significant role in Bulgaria’s past and present the BNB took a number of initiatives to celebrate the occasion. The anniversary provided great opportunities to familiarise the general public with the Bank’s role and functions in the past, with its current objectives and activities and with its responsibilities as a national central bank and a member of the European System of Central Banks. In early 2009 four students of economics who submitted essays on issues of great importance to the BNB received scholarships. The Bank minted a silver commemorative coin for its 130th Anniversary and published catalogues of Bulgarian coin and banknote specimens. Also published were the final four volumes of the BNB Archives covering the period between 1948–1990, and a short bilingual illustrated history of the Bank, as well as an album of 130 works of fine art from the BNB collection. Open Days at the Bank ranked as the most popular of celebration events. More than four thousand people visited the BNB Building on 11 and 12 April to learn a lot about banking, price stability, and the past and present of the Bank through a multiplicity of in- formation leaflets, exhibits, interactive displays, and games. To mark the anniversary, the Bank also held a celebration concert on 12 June at the Ivan Vazov National Theatre, play- ing host to the President, the President of the European Central Bank, government offi- cials, representatives of financial bodies, central banks, and international organisations. The Bulgarian National Television broadcast the concert live. A documentary on the BNB, Zlatnoto Doverie (“Faith as Good as Gold”) produced by Boyko Iliev and scripted by Yuriy Dachev, was also shot and shown by BNT. The BNB held events to raise public awareness of the importance of financial stabil- ity, the role and nature of the currency board in Bulgaria, and the euro as the currency of united Europe and Bulgaria’s coming adoption of it. An important mission of many initia- tives was to acquaint the public with the rights of those who use financial, payment and information services. All BNB initiatives to celebrate the occasion were guided by those foremost principles of modern central banking: openness, transparency, and public ac- countability. * The Articles of Association of the Bulgarian National Bank were approved on 25 January 1879. The first Governor was appointed on 4 April that year. The Bank was officially inaugurated on 23 May 1879 and BNB anniversaries are tradition- ally marked on 6 June, the day on which the Bank opened for business that year. 8 Bulgarian National Bank. Annual Report • 2009 9 Bulgarian National Bank. Annual Report • 2009 Bulgarian National Bank. Contents Summary _________________________________________________________ 11 I. Economic Development in 2009 __________________________________ 13 1. The External Environment _______________________________________ 13 2. The Bulgarian Economy ________________________________________ 15 II. Gross International Foreign Currency Reserves _____________________ 25 1. The Amount and Structure of Gross International Foreign Currency Reserves 25 2. Gross International Foreign Currency Reserve Risk and Yield ___________ 27 III. The National Payment System ___________________________________ 32 1. The RINGS Real-time Gross Settlement System _____________________ 33 2. Regulatory Changes ___________________________________________ 33 3. Payment System Developments __________________________________ 33 4. Payment System Oversight ______________________________________ 34 IV. Bank Reserves at the BNB ______________________________________ 35 V. Cash in Circulation ____________________________________________ 36 VI. Maintaining Banking System Stability _____________________________ 40 1. State of the Banking System _____________________________________ 40 2. Compliance with Prudent Banking Requirements _____________________ 45 3. Banking Supervision ___________________________________________ 45 VII. The Central Credit Register _____________________________________ 48 VIII. The Fiscal Agent and State Depository Function _____________________ 49 IX. International Relations and Participation in the ESCB ________________ 52 X. Statistics ____________________________________________________ 55 XI. Research ____________________________________________________ 57 XII. Information Infrastructure _______________________________________ 58 XIII. Human Resource Management ___________________________________ 60 XIV. Facilities Management __________________________________________ 62 XV. Internal Audit _________________________________________________ 63 XVI. BNB Budget Implementation _____________________________________ 65 XVII. Bulgarian National Bank Consolidated Financial Statements as of 31 December 2009 _______________________________________ 67 Major Resolutions of the BNB Governing Council _________________________ 101 Appendix (CD) 10 Abbreviations BIR Base interest rate BIS Bank for International Settlements, Basle, Switzerland BISERA System for servicing customer payments initiated for execution at a designated time BNB Bulgarian National Bank BORICA Banking Organization for Payments Initiated by Cards BSE Bulgarian Stock Exchange BTC Bulgarian Telecommunication Company CEFTA Central European Free Trade Association CIF Cost, Insurance, Freight CM Council of Ministers EBRD European Bank for Reconstruction and Development EC European Commission ECB European Central Bank ECOFIN Economic and Financial Council Bulgarian National Bank. Annual Report • 2009 Bulgarian National Bank. EFTA European Free Trade Association EMU Economic and Monetary Union ESCB European System of Central Banks EU European Union FLIRBs Front-loaded Interest Reduction Bonds FOB Free on Board GDDS General Data Dissemination System GDP Gross Domestic Product HICP Harmonized Index of Consumer Prices IFO Institute of Economic Research, Germany IMF International Monetary Fund MF Ministry of Finance MFIs Monetary financial institutions NLO National labour office NSI National Statistical Institute OECD Organization for Economic Cooperation and Development OPEC Organization of Petroleum Exporting Countries RINGS Real-time Interbank Gross Settlement System SBL State Budget Law SDR Special Drawing Rights TFP Transitional and Final Provisions VAT Value Added Tax ZUNK Bulgarian abbreviation of the Law on Settlement of Non-performing Credits Negotiated prior to 31 De- cember 1990 (LSNC) 11 Summary Summary In 2009 the global economic crisis