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Bulgaria: Banking System
Country Study > Chapter 3 > The Economy > Banking and Finance > Banking System

BANKING SYSTEM


As the chief financial instrument of economic policy making, the BNB assumed virtually all of the financial functions in the country under the centrally planned economy. Only the granting of foreign trade and consumer credits were separate functions, performed respectively by the Bulgarian Foreign Trade Bank and the State Savings Bank -- both of which were subordinate to the BNB. The BNB worked with the Ministry of Finance to finance capital investments in the economy. The BNB also monitored the economic organizations that received investment funds to ensure their use for accomplishing plan targets. As enterprises became more selffinancing in the 1970s, a greater share of their investment capital was composed of bank credits granted by the BNB. Between 1965 and 1975, the BNB share of investment funds jumped from 7 percent to 54 percent; the trend then moderated as enterprises began to rely more on retained earnings to finance investments.

Like industry and agriculture, banking under the BCP experimented occasionally with decentralization but remained quite centralized until shortly before the overthrow of Zhivkov. A 1987 reform nominally split Bulgarian banking into a two-tiered system. The function of the BNB was restricted to money supply, although it also retained significant supervisory power. The reform also created several specialized banks including the Agricultural and Cooperative Bank, the Biochemical Bank, the Construction Bank, the Electronics Bank, the Transportation Bank, and the Transport, Agricultural, and Building Equipment Bank -- each responsible for an industrial sector.

Post-Zhivkov banking reform began hesitantly but grew more comprehensive in 1991. In a controversial policy decision, the government first increased interest rates from 4.5 to 8 percent in 1990, then let them float freely beginning in 1991. Although the first private commercial bank was established in May 1990, a new National Bank Bill was not passed until June 1991. That law provided for a two-tier bank system independent of direct government control but accountable to the National Assembly. The first tier of the new system was to be the Central Bank, the second a separate system of commercial banks and lending institutions serving private citizens and enterprises. Three-month bank credits would be available to cabinet ministries. The BNB was to issue monthly balance statements and report semiannually to the National Assembly.

Data as of June 1992




Last Updated: June 1992


Editor's Note: Country Studies included here were published between 1988 and 1998. The Country study for Bulgaria was first published in 1992. Where available, the data has been updated through 2008. The date at the bottom of each section will indicate the time period of the data. Information on some countries may no longer be up to date. See the "Research Completed" date at the beginning of each study on the Title Page or the "Data as of" date at the end of each section of text. This information is included due to its comprehensiveness and for historical purposes.

Note that current information from the CIA World Factbook, U.S. Department of State Background Notes, Australia's Department of Foreign Affairs and Trade Country Briefs, the UK's Foreign and Commonwealth Office's Country Profiles, and the World Bank can be found on Factba.se.

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