CAPITAL AMOUNTING TO BGN10MN FOR BORIKA AND BANKSERVICE
Bozhidar Kabakchiev, Deputy Governor of the Bulgarian National Bank, to the BANKER weeklyMr. Kabakchiev, the Bulgarian settlement system has been operating flawlessly for more than seven years. What made it necessary to amend the regulations for its activities and to prepare the money transfers bill that is currently under discussion in the National Assembly?- The main purpose of this bill is to guarantee the stability of the settlement system as well as the rights of those who participate in the process - financial institutions, companies, and individuals. The law harmonizes the rules by which the settlement system in Bulgaria operates with those applied in the European Union (EU). It takes into account the EU directives which spread over cross-border settlements, electronic means of payment and e-money, the settlement system supervision, and the settlement finalisation. Besides, it includes the whole diverse process of transferring money which is currently regulated by several regulations of the Bulgarian National Bank (BNB) - Regulation N3 on settlements, N16 on card payments, N14 on cross-border settlements, and N31 on government securities trade.Does the new law regulate the transportation of currency across borders, too?- No, it doesn't. The conditions for cash currency import and export are stipulated in the Currency Act...But the new document aims at summarizing the rules for all types of settlement, doesn't it? Why does the cross-border transportation of currency in cash remain out of its reach?- It is not by chance that the new document discussed by the National Assembly is entitled Money Transfer Act. The name itself indicates that it will only regulate non-cash transfers, while cross-border currency transportation involves money in cash. That is why the new law does not stipulate rules for this type of activity. You said that the settlement systems are to be placed under supervision. How will that supervision be carried out?- There is a department in BNB that will be particularly responsible for that. However, its activities have not been legalized so far. The change will come with the Money Transfer Act which is now in Parliament. It stipulates that BNB supervise all companies which form the settlement system of the country and license them.Does it mean that banks such as United Bulgarian Bank (UBB) that possess or are willing to have their own card centres will need to apply in BNB for a licence?- No, a card centre itself is not a settlement system. Settlement systems are Bankservice and Borika, for example, as they include more than three participants among which transfers are carried out on the basis of concrete agreements.Will companies such as Euroline and Transcard which issue credit cards for the purpose of acquiring home appliances need to apply for a licence?- These, let's say phenomena, remain out of the reach of the act, too. The reason is that their cards are not bank ones and cannot be classified as means of payment. Payments through them can only be accepted by the companies that issue them. The cards cannot be used for drawing money from an ATM, for example. If these companies would like to offer this type of service through their cards, then they will have to apply for a licence in BNB.What requirements will be set to companies willing to act as settlement systems?- First of all, there will be extreme reliability requirements. The applicants will need to prove to BNB that they possess the necessary funds, technologies, staff, and experience in order to be allowed to operate as settlement systems. The minimum capital a company should have will amount to BGN10MN.But that's the minimum amount required from a bank! Why do you want it from companies that will do payments?- Still, they will make payments and operate with the people's money. That is why there are strict requirements to these companies. In the Czech republic, for example, a company applying to operate as a settlement system is required to have a capital of EUR15MN.But even Bankservice and Borika do not possess a BGN10MN minimum capital right now. What will BNB do with them?- They will have to gather that amount within three years following the adoption of the Money Transfer Act. Currently, BNB is the only one that meets the requirement for a minimum capital required from a settlement system. However, because of the high barrier there will hardly be private companies willing to work as settlement systems. Do you think there are perspectives for this business?- Why not? For example, e-payments are already offered even in Bulgaria. If this service grows further, a company may appear in the future willing to interact between mobile operators and banks through which the payments pass.What types of protection does the Money Transfer Act provide to the customers?- The act contains a special text that regulates the correction of mistakes in the money transfers. However, if the client and the serving bank enter a dispute about whether there has been a mistake in the transfer, who has made it, how much it has delayed the transfer and what damages it has caused, the act stipulates that the dispute be solved by a special conciliation committee. It will include two representatives of the Commission on Protection of Consumers and the Association of Commercial Banks as well as one of BNB who will also act as its chairman. The committee's proceedings will be completely free for the banks customers. However, its decisions will be considered recommendations. If both sides accept them, the dispute will have a quick end. But if one side opposes to the decision, it may go to court.How will banks be sanctioned if there is evidence that they have made a mistake in the transfer?- If the case refers to a transfer in Bulgaria that has been delayed for more than a day because of a mistake or another reason, the bank will have to pay the legal interest on the transfer amount, equal to the base interest rate plus a 10% addition per year. In case the mistaken or delayed transfer is international, the bank has to make corrections within a five-day period. If it gets late, it will have to pay an interest to its customer again.We hope that most disputes will be solved by the conciliation committee, as banks risk to tarnish their image if they do not accept its opinion and go to court.