Банкеръ Weekly

Briefs

EU DEMANDS GUARANTEES FOR INVESTMENTS UP TO EUR 20,000

Luchezar Stefanov, Director of Finance Ministry's External Finances Department and Chairman of the expert panel for negotiations with the EU on the Freedom to Provide Services Chapter, to the BANKER weekly Mr. Stefanov, Bulgaria has temporarily closed the Freedom to Provide Services Chapter from its negotiations with the European Union (EU). When will the regime of financial services in our country be practically fully liberalized?- This will happen when Bulgaria becomes a full-fledged member of the EU after January 2007. A regime of national treatment of natural and juristic persons from the EU countries will be effective in Bulgaria then. It will practically eliminate all discrimination barriers to the companies from the community, which are willing to step onto the Bulgarian market. An overall review of effective Bulgarian legislation is currently going on. If clauses that contradict the principles of the freedom to provide services are found, as well as such that are at variance with Bulgaria's commitments to the European Commission (EC), they will be changed in the spirit of EU legislation. Such was the case with the recently passed amendments to The Foreigners Abode in the Republic of Bulgaria Act. The changes have made easier the procedure for other countries' citizens permanantly residing in Bulgaria and for carrying out trade activities here. Until last year they were obliged to open at least ten working positions for Bulgarians. Amendments to the Gambling Act are being discussed now, that will eliminate the restrictions for organizing games of chance and lottery games on the part of joint-stock companies, registered in the EU countries. I should also note the draft bill for changes to the Foreign Investment Act, to be discussed by the Nationall Assembly. The Council of Ministers has proposed to revoke the required permission for permanent residence of investors from the EU. Will that result in elimination of some of the currently effective licensing and permit regimes?- Bulgaria has not explicitly undertaken such a commitment in the process of negotiations. The tendency in the EU is directed towards maximum possible facilitation of business and elimination of administrative hindrances to it. In the sphere of investment services, for instance, the EU Council of Ministers has approved a special directive, introducing the so-called Undertakings for Collective Investment in Transferable Securities (UCITS), whose holder is entitled to operate in all EU member states, provided the company has been allowed to do that by the respective country of its registration. That mechanism was adopted in Bulgaria as well by the Public Offering of Securities Act, which stipulates that a foreign investment company may be licensed on the basis of the permit it has already been given by the country of establishment. For the purpose, however, an intergovernmental agtreement should have already entered into effect.And how will self-employed people be treated?- Let's first of all specify what is meant by self-employed people. The legal definition is that these are persons who run their own business or firm in order to get profits. In other words this category includes lawyers, doctors, dentists, vets, architects, etc. The rules for treatment on an equal footing and allowing no restrictions regarding their nationality will be valid for them after the year 2007. However, there is a peculiarity connected with the mutual acknowledgement of the respective professional qualification. E.g. the diploma of a Bulgarian lawyer by a local university should be acknowledged by the EU country where he/she will be working. Serious discussions on these issues are going on within the EU and there might be changes until Bulgaria becomes a member. One of Brussles' requirements is for transparency of banks' direct and indirect shareholders. Do we observe it?- According to the appraisal of the EC in its November 2003 report on Bulgaria's progress, the Government has made a significant achievement in that respect. The amendments to the Banks Act, approved in September 2002, were entirely directed to increasing transparency of the shareholder equity and the structure of credit institutions. As you know, the shareholders owning over 3% of the equity capital were obliged to periodically submit information to the central bank. According to the law, when necessary such information could be provided on demand. The names of all shareholders owning over 10% of the company's capital, which ensures control in decision-making or allows them to nominate more than half of the management board members, are published in a special bulletin, issued by the Bulgarian National Bank (BNB) and on INTERNET. Moreover, amendments to BNB's Ordinance No 2 entered into effect in the beginning of December 2003, increasing the supervising rights of the central bank when assessing the structure and ownership of credit institutions.What will be the threshold for guaranteeing banks deposits after 2007?- EU legislation requires that an officially acknowledged system for insurance of deposits should be effective in each member country. The minimum level for the insurance is EUR20,000 per depositor. As it is known, such a fund was set up in Bulgaria in 1998 by the Bank Deposit Insurance Act. The latter was amended twice since then and currently deposits up to BGN15,000 (or EUR7,670) are guaranteed. By end-2004 the threshold of insured deposits will be raised to BGN22,000 (or EUR11,250). The EU-set lower threshold will be reached in the end of 2006 when the Bank Deposit Insurance Fund will be entirely guaranteeing deposits up to BGN39,200 (or EUR20,040).Bulgaria has negotiated a 3-year transit period under the schemes for compensation of investors. Could you specify what it means? - The 3-year grace period is connected with the protection of investment companies' small clients. The EC insists on a minimum coverage of EUR20,000 and compensation of 90% of the eventual losses in case of bankruptcy. At the present stage, however, this amount is too high for Bulgarian companies, because the domestic capital market is not so developed. Therefore, our negotiating panel of experts demanded a transit period of three years after 2007 within which the fund for insurance of investors will start operating in compliance with the EU requirements. The beginning will be laid in January 2005 when the ceiling of guaranteed investments will become EUR6 000. The amount will be doubled to EUR12,000 in 2007; in 2008 it will go up to EUR15,000 and will reach the projected EUR20,000 two years later. E-trade of financial services is still emerging in Bulgaria. Have any legislative changes been planned to promote it? -Yes. We have to do much work for harmonization of legislation in the field of e-trade. The initial steps were already done by passing the law on the e-document and e-signature and three ordinances, connected with it. The Council of Ministers programme projects that a special bill on the development of e-trade should be discussed by the end of 2004. It is being drafted under the guidance of the Minister of State Administration Dimiter Kalchev. According to our expectations, the law will be published in the official Gazette by the year-end.

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