Банкеръ Weekly



A reason comes into view that will make banks in Bulgaria happy but will force people and companies to get ready for some extra spending. This is exactly what will happen if the Minister of Finance, Milen Velchev, fulfils his plans by the end of the year and puts a ban on paying more than BGN3,000 in cash.I know that until a certain moment the Bulgarian legislation has not allowed large amounts to be paid cash. But I don't see a reason why this regulation should not be restored, the Minister told the BANKER weekly. I hope this will enable us to bring to light most of the money that circulates in the grey economy. Some of the European Union member countries apply such restrictions, too. As far as I remember, in France you cannot pay more than EUR5,000 in cash. I think that this limit should be BGN3,000 in Bulgaria, but this is not the final decision at all. The limit is still to be discussed, so that it would not cause difficulties to the people, the Minister added. A law of this kind may appear of equal scale with the law on the Bulgarian lev denomination carried out after July 1, 1999. Because all companies registered under the Commercial Act which now carry out their financial transactions with money brought in suitcases will suddenly be forced to use the services of the banks. The introduction of a lowest limit of non-cash payments will increase the number of affected people, because each bank transfer will have to be backed by an invoice. In turn, each invoice goes along with the respective value-added tax.Moreover, should the so called Velchev bill be voted, companies will have to prepare additional money to pay their bank fees and commissions. The greatest victims will be the businessmen who operate in the grey economy. As they pass through banks, they will have their whole turnover brought to light. Then the tax authorities will be able to inspect them whenever they want to. Especially when the fiscal investigation office starts operations. According to the plans of the government, the bank secrecy will not be valid for the so called tax police.The citizens will be affected, too, if Milen Velchev keeps his word. His plan will not affect their cash salaries, pensions, or everyday shopping. Nor will it affect the purchase of home appliances or computers, for example. However, when an individual buys a real estate or an expensive furniture, the limit will be valid - the only way to make the payment will be through a bank.On the other hand, shops will not be able to exist in the future unless they install POS terminals or start to accept debit and credit cards as means of payment.Should Minister Velchev's idea be implemented, it will inevitably lead to an increased number of money transfers through commercial banks. In Bulgaria there is no statistical data about their annual amounts. As to the total amount of interbank transfers served by Bankservice AD and the RINGS real-time gross settlement system, it reached BGN112.6BN in 2003. That's almost three times the gross domestic product. However, registration in this case does not include transfers among different branches of one bank, as well as the currency payments on the international SWIFT system. Therefore, it is quite difficult to summarize the exact amount of money that passes through Bulgarian credit institutions.Experts from Bankservice claim that in rich countries where cash payments are survival and most of the transactions are carried out through the banks, the amount of interbank transfers exceeds some eighty times the annual gross domestic product. In Bulgaria, however, the situation is extremely different and cash payments are still quite respected. As a matter of fact, for many small and medium-sized businessmen this is the only way to avoid the numerous and still high taxes before they close the business. In this sense, the expected law on payments may appear a bulldozer that cleans the way for large European companies entering the Bulgarian market. Damages for the local producers and traders cannot be calculated now, since the amount of money that circulate outside the banks is not known. According to experts from the Bulgarian National Bank (BNB) and Bankservice, the amount goes close to the tens of billions that pass through the credit institutions. If things go this way and if only half of this money starts passing through the banking system, its profits will grow considerably.The total amount of bank revenues from fees and commissions on settlements made in 2003 is BGN207MN. It does not include fees on served launched credits which amount to BGN63.7MN. What is more important, though, is that fees and commissions make the second biggest item of the banks' revenues, following revenues from interests on the loans.Of course, the positive and negative effects described above will only appear in case that the special law on payments is voted by the MPs and is strictly applied. Which will

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