ECB: Proposed Changes to Bulgaria Deposit Insurance Law Harm C-BankFinance | December 10, 2014, Wednesday // 17:21| views
The Bulgarian National Bank says it has received a letter from ECB head Mario Draghi warning against amendments to deposits-related legislation. Photo by EPA/BGNES
The European Central bank has warned against proposed amendments to the Deposit Insurance Act, saying they could constitute an infringement on the national bank's independence.
In a statement the Bulgarian National Bank (BNB), Bulgaria's central regulator, cites the letter from ECB signed by the European institution's head Mario Draghi.
The letter reportedly warns that the draft legislation will prevent the BNB from investing and managing reserves.
If the BNB is allowed to make provisional transfers to the Deposit Insurance Fund (DIF), the central bank's own resources and reserve could be severely limited, hindering tasks carried out by the bank within the European System of Central Banks, ECB has argued.
It has also opined that stability of Bulgaria's currency board might be put in jeopardy with such a move.
The Bulgarian government is considering to allow direct grants to the DIF as a proactive measure against possible developments similar to those at Corporate Commercial Bank (KTB), which forced Sofia to issue fresh debt to give KTB depositors access to their savings.
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