ECB criticizes Bulgaria's controversial bond purchase bill

By bne IntelliNews April 19, 2012

bne -

The clash between the Bulgarian government and the central bank over a draft law which would allow the government to invest pension funds in unrated Bulgarian bonds was stoked on April 18 by criticism of the legislation by the European Central Bank.

In an opinion requested by the Bulgarian government, the ECB said the law would discriminate against foreign debt securities, which would continue to require a credit rating. "This leads to unequal treatment of the different investment instruments, which could create competition and market distortions," the ECB said in a statement posted on its website.

Finance Minister Simeon Djankov responded in a letter stressing that any Bulgarian bond issues purchased by the fund would have interest rates based on market benchmarks, the dpa news agency reports.

However, the Bulgarian central bank sided with its colleagues in Frankfurt. "The ECB only gives its opinion in particular cases regarding draft legislation. The fact that it even published an opinion shows the ECB's concern," the BNB said in a statement.

The central bank clashed with the government on the issue last week, saying it "cannot support" proposed plans to invest up to 30% - some €276m - of pension funds in Bulgarian state securities starting this year, AFP reported.

The central bank said it is urging the government once again to "withdraw this draft law and submit it to an in-depth discussion between the institutions responsible for macroeconomic and financial stability."

The Bulgarian government wants to allow its Silver Fund, set up to anchor the public pension system, to also invest in bonds issued by national and local administrations. According to the ECB, the fact that Bulgarian securities would not require a rating could place the Bulgarian government in "a privileged position compared to other issuers." Such "indirect discrimination" could lead to "unjustified restrictions on the free movement of capital," thus violating European Union rules, it said.

Related Articles

Macedonia kept on hold as Balkans edges towards EU goal

Clare Nuttall in Bucharest -   Macedonia’s EU accession progress remains stalled amid the country’s worst political crisis in 14 years, while most countries in the Southeast Europe region have ... more

Austria's Erste rides CEE recovery to swing to profit in Jan-Sep

bne IntelliNews - Erste Group Bank saw the continuing economic recovery across Central and Eastern Europe push its January-September financial results back into net profit of €764.2mn, the ... more

CEE leaders call for Nato troops to help deter Russian aggression

bne IntelliNews -   Central and Eastern European leaders blasted Russian "aggression" on November 4 and called for Nato to boost its presence in the region. The joint statement, issued at an ... more

Register here to continue reading this article and 2 more for free or purchase 12 months full website access including the bne Magazine for just $119/year.

Already a subscriber or registered - click here to recover access.

If you a IntelliNews Pro user - click here to login.

Thank you. Please complete your registration by confirming your email address.
A confirmation email has been sent to the email address you provided.

To continue viewing our content you need to complete the registration process.

Please look for an email that was sent to with the subject line "Confirmation bne IntelliNews access". This email will have instructions on how to complete registration process. Please check in your "Junk" folder in case this communication was misdirected in your email system.

Already a subscriber or registered - click here to recover access.

If you a IntelliNews Pro user - click here to login.

If you have any questions please contact us at sales@intellinews.com

Subscribe to bne IntelliNews website and magazine

Subscribe to bne IntelliNews website and monthly magazine, the leading source of business, economic and financial news and commentary in emerging markets.

Your subscription includes:
  • Full access to the bne content daily news and features on the website
  • Newsletters direct to your mailbox
  • Print and digital subscription to the monthly bne magazine
  • Digital subscription to the weekly bne newspaper

Already a subscriber or registered - click here to recover access.

If you a IntelliNews Pro user - click here to login.

bne IntelliNews
$119 per year

All prices are in US dollars net of applicable taxes.

If you have any questions please contact us at sales@intellinews.com

Register for free to read bne IntelliNews Magazine. You'll receive a free digital subscription.

Already a subscriber or registered - click here to recover access.

If you a IntelliNews Pro user - click here to login.

Thank you. Please complete your registration by confirming your email address.
A confirmation email has been sent to the email address you provided.

IntelliNews Pro offers daily news updates delivered to your inbox and in-depth data reports.
Get the emerging markets newswire that financial professionals trust.

"No day starts for my team without IntelliNews Pro" — UBS

Thank-you for requesting an IntelliNews Pro trial. Our team will be in contact with you shortly.

Dismiss