Bulgaria - Banking and securities

All banks were nationalized in 1947 in accord with Soviet banking policies. Until 1969, the Bulgarian National Bank (BNB) was the chief banking institution handling deposits of state and local governments and national enterprises. It was the bank of issue and was authorized to credit enterprises with funds for facilities and activities not covered by the capital investment plan. In 1969 it was renamed the Bulgarian Central bank and remained the bank of issue. Two new banks—the Industrial Bank and the Agricultural and Trade Bank—assumed the functions of providing credit for industry and for agriculture and individuals, respectively. In 1968, the Bulgarian Foreign Trade Bank was established as a joint-stock company. The State Savings Bank was the chief savings institution.

In 1996, the Bulgarian National Bank, lacking reserves, virtually gave up attempts to stabilize the exchange rate and contain inflation. However, the outlines of future economic policy under a new government appear to be decided, given that all parties agreed that a currency board was the cinch pin of economic stabilization. The IMF opened negotiations with the caretaker government on the introduction of a currency board, which it made a condition of further funding. When Bulgaria achieved independence in 1991, a two-tier banking system was formed. The Bulgarian National Bank became the country's central bank. The country has a state savings bank with 491 branches. There are about 80 commercial banks in Bulgaria. Some of the commercial banks are cross-border banks that are involved in the foreign exchange market. Some of the banks licensed for cross-border foreign exchange include: Agricultural and Co-operative Bank (1987), Balkenbank (1987), Biochim Commercial Bank (1987), Bulgarian Post-Office Bank, Economic Bank (1991), Hemus Commercial Bank, and the Bank for Economic Enterprise (December 1991).

In a related move that was also seen as a step towards the restrictive regime of a currency board, the central bank announced in late January of 1997 that it would no longer be fixing a base interest rate. Instead, the BNB would set an indicative rate defined by the interest on short term government bonds. Banks themselves would be able to set their own rates according to market principles, without interference from the central bank. In 2001, the exchange rate to the dollar was 2.1847 leva. The International Monetary Fund reports that in 2001, currency and demand deposits—an aggregate commonly known as M1—were equal to $2.2 billion. In that same year, M2—an aggregate equal to M1 plus savings deposits, small time deposits, and money market mutual funds—was $5.5 billion. The money market rate, the rate at which financial institutions lend to one another in the short term, was 3.74%.

The First Bulgarian Stock Exchange was established in Sofia on 8 November, 1991 as a joint stock company with capital of Lv10,000,000 divided into 10,000 shares of Lv1,000 each. It is managed by a Board of Directors and by a Chief Executive. The exchange currently trades mainly in unlisted securities. The SOFIX Index grew by about 54% in 2002.

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