Headquartered in Sofia, the bank was established in 1879. It is the 13th-oldest continuously existing central bank in the world.[citation needed] The bank has a key role in the Bulgarian economy. An independent institution responsible for issuing all banknotes and coins in the country, BNB is tasked with safekeeping the government's currency reserves. It is also the sole owner of the Bulgarian Mint. Since 1 October 2007, it has been a member of the European System of Central Banks. The governor of the BNB is a member of the General Assembly of the European Central Bank.
History
Establishment and early development
The original BNB headquarters, c. 1910
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 BNB 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 Lev. The following year, Bulgaria minted its first coins of 2, 5 and 10 stotinki.
Initially, the BNB 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 introduce banknotes into circulation. The Law on the foundation of the BNB and the new Charter, both passed in 1885, reorganised the Bank, granting it monopoly of note issue.[3] Later in the same year, the Bank issued the first Bulgarian banknotes.
War period (1912-1918) and aftermath
By the outbreak of the Balkan War (1912), the BNB 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 BNB 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.
Interwar stabilization and World War II
In 1928, Bulgaria was granted a large "Stabilisation Loan" coordinated by the Economic and Financial Organization of the League of Nations. This was intended to stabilise the Lev, to reinforce the capital stock of the BNB, and to liquidate the Government's debt to the Bank. Two new laws were passed for the same purpose – the Law on the BNB, 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 BNB 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 BNB was compelled again to lend to the Government and deal with the depreciation of the Lev.
Communist era
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 BNB 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.
Since 1990
The return of the Bulgarian banking system to the market economy principles and of the BNB 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 BNB, which restored the Bank's autonomy and gave it the responsibility for supervising banks. In 1997 another Law on the BNB 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 BNB 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 BNB, which ensured the institutional, functional, financial and personal independence of the BNB, 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 BNB has been a member of the European System of Central Banks.[4]
Operations
The bank is organised into three departments:
Issue Department, responsible for maintaining the full foreign exchange coverage of the total amount of monetary liabilities, i.e. the issuance of national currency
Banking Department, which, in case of systemic risk, acts as the lender of last resort. It also administers the currency board, introduced in Bulgaria in 1997
Supervision Department, which oversees the country's banking system.
Head office building
The Bulgarian National Bank's headquarters in Sofia are located on the central Battenberg Square. The current edifice was commissioned to renowned architects Ivan Vasilyov and Dimitar Tsolov and built between 1934 and 1939 in the non-decorative Neoclassical style of the time. It spreads over an area of 3,700 m2 and has four overground and three underground storeys. Its interior is the work of Ivan Penkov and Dechko Uzunov.
Governors
Ludovig Carbonneur, acting, 4 April 1879 – 1 July 1879
Georgi Zheliazkovich, 1 July 1879 – 27 April 1881
Tsidor Mihailovich, acting, 27 April 1881 – 11 October 1883
