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    ECB Opines on Bulgarian Covered Bond Law, Purview of AML/CFT Authority

    February 22, 2022

    The European Central Bank (ECB) published an opinion on the implementation of the Covered Bond Directive of European Union into the Bulgarian law and on the establishment of the anti-money laundering and countering the financing of terrorism (AML/CFT) Authority in European Union.

    The ECB opinion on the proposal for a regulation establishing the AML/CFT Authority covers the scope of direct and indirect supervision of AML/CFT Authority, cooperation between AML/CFT Authority and ECB, processes employed in direct and indirect supervision, and governance structure of the AML/CFT Authority. The European Commission had adopted this proposal in July 2021. ECB sets out that it stands ready to cooperate with AML/CFT Authority and contribute to the legislative process, by sharing its experience as a Union-level prudential supervisory authority, where this experience may be relevant for building Union-level AML/CFT supervision. ECB would welcome an increase in the scope of AML/CFT Authority’s direct supervisory tasks to cover a wider subset of entities that ECB directly supervises. The proposed regulation requires AML/CFT supervisors to transmit to the database, the advice provided to other "national" authorities in relation to the authorization procedures, the withdrawal of authorization procedures, and the fit-and-proper assessments of shareholders or members of the management body of individual obliged entities. ECB notes that the word "national" should be deleted, as AML/CFT supervisors will provide information in this respect not only to national authorities, but also to ECB.  In its opinion, ECB also welcomed the wide range of powers and tools envisaged for AML/CFT Authority to discharge its oversight function and ensure high supervisory standards across the European Union. ECB notes that AML/CFT Authority’s oversight toolkit in the area of information gathering for non-selected obliged entities does not include some of the tools available to ECB with respect to gathering information about the less significant supervised entities. 

    In its opinion on the draft law on covered bonds in Bulgaria, ECB welcomes the draft law’s introduction of a new legal regime for covered bonds, which aims to contribute to the development of the Bulgarian capital market and improve the level of protection and legal certainty for investors. The draft law designates Bulgarian National Bank (BNB) as the competent authority responsible for the public supervision of covered bonds issued by credit institutions. There is no existing national legislation on covered bonds in Bulgaria and BNB does not have any relevant supervisory tasks under the existing Law on mortgage bonds, which the draft law repeals. However, ECB emphasizes that a proposed conferral of new tasks on a national central bank participating in the European System of Central Banks (ESCB) must be assessed against the prohibition on monetary financing under Article 123(1) of the Treaty on the Functioning of the European Union. In its opinion, ECB concluded that the new tasks conferred by the draft law on BNB regarding the supervision of the issuance of covered bonds by credit institutions can be regarded as central bank tasks, as they would complement the existing functions of BNB in relation to the prudential supervision of credit institutions. In short, the new tasks conferred by the draft law are not atypical of central bank tasks and have been conferred on a number of other ESCB national central banks. ECB has published this opinion upon a request from the Bulgarian Minister of Finance for an opinion on a draft law on covered bonds. The draft law is intended to implement the Covered Bond Directive (2019/2162) into Bulgarian law. 


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    Keywords: Europe, EU, Banking, Securities, Opinion, AML CFT, ML TF Risk, AML CFT Authority, Covered Bonds, Bulgaria, Covered Bond Directive, BNB, EC, ECB

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