The 2002 International Monetary Fund (IMF) Financial System Stability Assessment (FSSA) of Bulgaria defined the Banking Integrated System for Electronic Transfers (BISERA), as a systematically important payment system (SIPS). BISERA is an automated clearing house for retail payments in Bulgaria. The FSSA also assessed the then existing Express Service Payment System (ESPS) for large inter-bank payments and payments between the government and banks; however since the 2002 IMF assessment ESPS has been replaced by the Real-Time Interbank Gross Settlement system (RTGS) RINGS. The 2002 IMF report noted that BISERA failed to comply with certain important Committee on Payment and Settlement Systems (CPSS) Core Principles. However, the report also stated that some of these deficiencies would be addressed in full once RINGS became operational and RINGS became operational in 2003. Based on information on the Bulgarian National Bank (BNB) website, RINGS is compliant with the CPSIPS. However, apart from this statement from the BNB there is insufficient information publicly available as to Bulgaria's compliance with the BIS CPSIPS.

General Overview

The 2002 International Monetary Fund (IMF) Financial System Stability Assessment (FSSA) of Bulgaria defined the Banking Integrated System for Electronic Transfers (BISERA), as a systematically important payment system (SIPS). BISERA is an automated clearing house for retail payments in Bulgaria. According to the FSSA, there was significant room for improvement in the BISERA system. The FSSA also assessed the then existing Express Service Payment System (ESPS) for large inter-bank payments and payments between the government and banks; however since the 2002 IMF assessment ESPS has been replaced by the Real-Time Interbank Gross Settlement system (RTGS) RINGS. (IMF 2002, p. 62; ECB 2002, p. 24) The 2002 IMF report noted that BISERA failed to comply with certain important Core Principles, however, the report also stated that some of these deficiencies would be addressed in full once RINGS became operational. The Bulgarian National Bank (BNB) launched the Real Time Gross Settlement System (RTGS) RINGS in June 2003. (BNB website)

Based on information on the Bulgarian National Bank (BNB) website, RINGS is compliant with the Core Principles for Systemically Important Payment Systems (CPSIPS) promulgated by the Committee on Payment and Settlement Systems (CPSS) of the Bank for International Settlements (BIS) and the standards applied by the ECB. In 2005, RINGS processed 69.04% of payments and BISERA 26.53%. (BNB website; BNB 2005, p. 29)

According to a 2007 article by the Sofia News Agency, Bulgaria's payment system meets the European Union standards, a deputy governor of the central bank confidently said. Bulgaria has successfully introduced the International Bank Account Number (IBAN) format and drawn up the required legislative framework. Bulgaria is expected to introduce the Directive on Payment Services (PSD) by the end of May. The directive, proposed by the European Commission and backed by European Union finance ministers at the end of March, is considered to be the biggest step forward to the creation of an EU-wide single market for payments. (SNA 2007)

There are no specific laws regulating the payment system in Bulgaria. Specific provisions governing the system can be found in several laws and regulations. Pursuant to the Law on the Bulgarian National Bank (LBNB 1997), the BNB supports the development and operation of efficient payment systems and oversees them. The BNB is mandated to oversee individual systems for settlement of payments and securities and to judge their effectiveness. (ECB 2002, p. 15; BNB 2005, p. 29)

The Banking Integrated System for Electronic Transfers (BISERA) was introduced in 1992. The national card operator, the Bank Organization for Payments Initiated by Cards (BORICA), was established in 1995 to service card payments on the territory of the Republic of Bulgaria. The national card payments system, BORICA, is operated by a company of the same name. The company is wholly owned by the BNB. BORICA Ltd. is the national operator of the ATM and POS network in Bulgaria and acts as a processing company for the cards of Visa International's member banks and as a third-party service provider company for Europay International member banks within the country. (ECB 2002, pp. 15, 28)

Most of the non-cash payments in Bulgaria are settled through the national settlement system, BISERA. Although BISERA was designed, programmed and implemented by the Bankservice joint stock company on behalf of the Bulgarian National Bank. Bankservice is responsible for the development, maintenance and operation of the system. It also offers other telecommunications and banking automation services to banks. The Bulgarian National Bank is the major shareholder in the company (37% of the capital). The rest of the capital is distributed among commercial banks according to a quota principle, depending on the share of each bank in the volume and value of interbank transactions, on the number of branches belonging to the bank and on the size of each bank.s own capital. Bankservice has a pyramid structure with a head office, five branches and 28 local offices, which are the access points to BISERA. (ECB 2002, p. 24)

Operated by the BNB, the Real-time Interbank Gross Settlement system, RINGS, is the national interbank RTGS system. Managed by the interbank operator Bankservice, BISERA (Banking Integrated System for Electronic Transfers) is a designated-time gross settlement system. RINGS processes high-value 'priority payments' (e.g. interbank payments, payments between participants and the BNB, payments relating to government securities, etc.), high-value customer payments equal to or above BGN 100,000, and provides final settlement for all transactions previously netted in other systems (e.g. BISERA, BORICA). All transactions are denominated in BGN. BISERA clears low-value non-urgent transactions (such as credit transfers, direct debits, truncated cheques, letters of credit, debit cards and office cash collections) below BGN 100,000. According to the 2005 BNB Annual Report, participants in the national payment system are the BNB and all commercial banks. BISERA has around 32 participant banks, including the BNB. In fact, all banks and bank branches in Bulgaria participate in BISERA. (BNB 2005, p. 29; HSBC 2006)

The RINGS system helps banks manage their liquidity. Commercial banks are able to perform real time monitoring of cash-flow dynamics and to be prepared in advance to cover pending payments. The schedule of submitting requests to RINGS also contributes to limiting risk since large debit positions are in the form of requests submitted earlier in the system day. In case of a queuing request, banks with insufficient funds would have time to cover their positions. (BNB 2004, p. 29)

According to the 2002 FSSA, a number of issues still needed to be addressed before full compliance could be achieved with the CPSIPS. A Law on Funds Transfers, Electronic Payment Instruments and Payment Systems was adopted by the National Assembly on March 25, 2005. Under it, legal relations connected with payments became statutory regulations through the codifying approach. With the enforcement of this Law, Bulgaria meets its international commitment to ensure full compliance in the field of payment and settlement systems. (IMF 2002, p. 62; BNB 2004, p. 30)

The Principles

I. The system should have a well-founded legal basis under all relevant jurisdictions.

II

The Bulgarian National Bank (BNB) launched the Real Time Gross Settlement System (RTGS) RINGS in June 2003. According to the BNB, RINGS complies with the Core Principles for Systemically Important Payment Systems promulgated by the Committee on Payment and Settlement Systems of the Bank for International Settlements (BIS) and the standards of the ECB. (BNB website) However, there is no further information publicly available as to Bulgaria's compliance with this Principle.

There are no specific laws regulating the payment system in Bulgaria. Specific provisions governing the system can be found in several laws and regulations. Under the Law on the BNB, the BNB is to assist in the establishment and running of efficient payment mechanisms. The Law also provides that the Bulgarian National Bank may organize and operate payment systems and clearing offices to facilitate non-cash payments. In accordance with this Law, the BNB issued Regulation No. 3 on payments and Regulation No. 16 on payments initiated by bank cards. (ECB 2002, p. 15)

According to the 2002 International Monetary Fund (IMF) Financial System Stability Assessment (FSSA) of Bulgaria, some legal risks would be eliminated once the European Union Settlement Finality Directive is implemented in Bulgarian law. This was expected to be implemented at the same time as the RTGS system went live, i.e., in June 2003. (IMF 2002, p. 64)

Regarding BISERA (Banking Integrated System for Electronic Transfers) 3, the Automated Clearing House for retail payments, the Electronic Signature and Documentation Law has been enacted. This law validates the use of authenticated BANKNET (a communications system for banks and corporations) messages to pass instructions from banks to BankService, for customer and other payments to be made through BISERA 3. As of 2002, there were however continuing questions on insolvency law and creditors' rights, which may impact on some payments made through the scheme. Moreover, there appeared to have been no effort to investigate any potential conflicts of insolvency and other laws with the home country legislation of 8 foreign bank branches in Bulgaria. (IMF 2002, p. 65)

The main objective of the Law on Funds Transfers, Electronic Payment Instruments, and Payment Systems adopted in late March 2005 and in force from October is to provide payment system stability and protect participants in the payment process, and customers in particular. The Law regulates relations in electronic payment instruments and systems and ensures harmonization of Bulgaria's legal framework in this sphere with acquis communautaire: an important step in the process of integrating Bulgaria's payment infrastructure with that of European states. In compliance with the Law's provisions, the BNB adopted two new Ordinances related to it: Ordinance No. 3 on Funds Transfers and Payment Systems and Ordinance No. 16 on Electronic Payment Instruments. The two Ordinances rest on the provisions of the Law, accumulated experience, and statutory instruments proposed by the EU. They outline the payment process and infrastructure, ensuring sufficient flexibility for the intensive development of non-cash payments and public developments stemming from it. Ordinance No. 3 regulates the main requirements for the payment systems' operations and functions and risk management rules. It contains detailed prescriptions on terms and procedures for granting licenses to system operators and lists required documents. Special attention is paid to system operators' accountability and to the control they exercise over payment system participants. Changes were made to the documents used in the payment process. (BNB 2005, p. 30)

Bankruptcy procedures are in general laid down in the Law on Commerce (last amended in 2000). However, some specific provisions are included in the Law on banks (last amended in 2001), in the chapter entitled .Bank Insolvency. According to the Law on banks, the Bulgarian National Bank is the only institution which may request a court to initiate bankruptcy proceedings. In the event of a bank becoming insolvent, the Bulgarian National Bank will revoke the bank's license and request the court to initiate bankruptcy proceedings. No zero-hour clause is applied to payments. In principle, the Bulgarian National Bank decides whether the insolvent bank is to be excluded from the settlement system and, if so, when. In practice banks are immediately excluded from the system once their banking license is revoked. (ECB 2002, p. 16)

II. The system's rules and procedures should enable participants to have a clear understanding of the system’s impact on each of the financial risks they incur through participation in it.

II

The Bulgarian National Bank (BNB) launched the Real Time Gross Settlement System (RTGS) RINGS in June 2003. According to the BNB, RINGS complies with the Core Principles for Systemically Important Payment Systems promulgated by the Committee on Payment and Settlement Systems of the Bank for International Settlements (BIS) and the standards of the ECB. (BNB website) However, there is no further information publicly available as to Bulgaria's compliance with this Principle.

According to the 2002 International Monetary Fund (IMF) Financial System Stability Assessment (FSSA) of Bulgaria, regarding BISERA (Banking Integrated System for Electronic Transfers) 3 the Automated Clearing House for retail payments, banks are in a position to understand their liquidity risks in the scheme. However, they are unable to fully manage those risks, since the overnight processing cycle means that they have no opportunity to cover any liquidity shortfall in time to permit all the valid payments that they have submitted to BankService to be made on the value date instructed by the originators. (IMF 2002, p. 65)

The BNB issues Banking Unified Standards (BUSs) which contain rules on the execution of payment transactions via BISERA. One of the most important standards is BUS 7092, on settlement in the BNB. It regulates the organization of the settlement system, including settlement procedures, accounting records, registration of the transfer instructions, information transfer, message formats and control procedures, etc. As of 2002, work on amending the BUSs was under way. The BUSs will define the main characteristics of and provide the platform for the work of the future Bulgarian RTGS system. Other standards regulate payments using different payment instruments (credit transfers, direct debits, cards, checks and letters of credit). BUS 12097 on interbank and intrabank payments on equity transactions with DVP is applicable in the field of securities trading payments. (ECB 2002, p. 24)

III. The system should have clearly defined procedures for the management of credit risks and liquidity risks, which specify the respective responsibilities of the system operator and the participants and which provide appropriate incentives to manage and contain those risks.

II

The Bulgarian National Bank (BNB) launched the Real Time Gross Settlement System (RTGS) RINGS in June 2003. According to the BNB, RINGS complies with the Core Principles for Systemically Important Payment Systems promulgated by the Committee on Payment and Settlement Systems of the Bank for International Settlements (BIS) and the standards of the ECB. (BNB website) However, there is no further information publicly available as to Bulgaria's compliance with this Principle.

According to the 2002 International Monetary Fund (IMF) Financial System Stability Assessment (FSSA) of Bulgaria, although the banks are in a position to understand their liquidity risks in the BISERA (Banking Integrated System for Electronic Transfers) 3, the Automated Clearing House for retail payments, they are unable fully to manage those risks, since the overnight processing cycle means that they have no opportunity to cover any liquidity shortfall in time to permit all the valid payments that they have submitted to Bank Service to be made on the value date instructed by the originators. (IMF 2002, p. 65)

According to the 2002 FSSA, the BNB should establish the Credit Reserve Fund with a clear mandate to assist the timely and complete daily settlement through the Real Time Gross Settlements (RTGS) system of transactions in BISERA 4 (the automated clearing house for retail payments), BORICA (the inter bank card processing company) and the Central Securities Depository. The BNB should monitor the banks' use of their minimum reserve balances as sources of intra-day liquidity, and should if necessary consider relaxing the penalties on banks falling below 50 percent of their required reserves on a few days during each maintenance period. (IMF 2002, p. 67)

An interbank payment transaction is only carried out if the sending bank has sufficient funds on its current account with the BNB. Credit risk for the BNB is avoided because overdrafts on the current accounts of commercial banks are not allowed. There are no specific liquidity requirements to be met by system participants. However, banks are subject to supervision by the central bank, which may withdraw their licenses in the event of a serious liquidity crisis. (ECB 2002, p. 28)

The RTGS system ensures a more effective risk management by the BNB. Participating banks are able to monitor and effectively manage their liquidity and the payment process. The interactive monitoring will be realized via a proprietary network. (ECB 2002, p. 30)

IV. The system should provide prompt final settlement on the day of value, preferably during the day and at a minimum at the end of the day. (Systems should seek to exceed the minima included in this Core Principle.)

II

The Bulgarian National Bank (BNB) launched the Real Time Gross Settlement System (RTGS) RINGS in June 2003. According to the BNB, RINGS complies with the Core Principles for Systemically Important Payment Systems promulgated by the Committee on Payment and Settlement Systems of the Bank for International Settlements (BIS) and the standards of the ECB. (BNB website) However, there is no further information publicly available as to Bulgaria's compliance with this Principle.

RINGS settles transactions on a same-day basis and with immediate finality. All payments are settled in real time across the participants' banks' correspondent accounts at the BNB. Transactions are settled on a same-day settlement cycle through BISERA (Banking Integrated System for Electronic Transfers). (HSBC 2006)

According to the 2002 International Monetary Fund (IMF) Financial System Stability Assessment (FSSA) of Bulgaria, the payments that are made through the BISERA 3, the Automated Clearing House for retail payments, are final and irrevocable from the opening of business on the value date, and they are (by definition) made in central bank money. (IMF 2002, p. 65)

The RTGS system handles all the payments, which in 2002 were effected through the Express Service, and all credit transfers of BGN 100,000 or more made through BISERA 3. It also handles the net settlements of the remaining payments through the BISERA system, of the card payments through the BORICA (Banking Organization for Payments Initiated by Cards) and of the corporate securities transactions through the Central Securities Depository (CDAD). (IMF 2002, p. 62 )

A Law on Funds Transfers, Electronic Payment Instruments and Payment Systems was adopted by the National Assembly on March 25, 2005. The main objective of the law is to establish the regulation of legal relations connected with payments through attaining full compliance with European Union (EU) Directives on cross-border credit transfers and settlement finality, as well as with the recommendation concerning electronic payment instruments. The requirements in the Directives on establishing, operating, and overseeing electronic money institutions and the recommendation on out-of-court settlement of consumer disputes are also observed. (BNB 2004, p. 30; BNB 2005, p. 30)

V. A system in which multilateral netting takes place should, at a minimum, be capable of ensuring the timely completion of daily settlements in the event of an inability to settle by the participant with the largest single settlement obligation. (Systems should seek to exceed the minima included in this Core Principle.)

II

A Law on Funds Transfers, Electronic Payment Instruments and Payment Systems was adopted by the National Assembly on March 25, 2005. The main objective of the Law is to establish the regulation of legal relations connected with payments through attaining full compliance with European Union (EU) Directives on cross-border credit transfers and settlement finality, as well as with the recommendation concerning electronic payment instruments. The requirements in the Directives on establishing, operating, and overseeing electronic money institutions and the recommendation on out-of-court settlement of consumer disputes are also observed. (BNB 2004, p. 30; BNB 2005, p. 30) However, there is no further information publicly available as to Bulgaria's compliance with this Principle.

VI. Assets used for settlement should preferably be a claim on the central bank; where other assets are used, they should carry little or no credit risk and little or no liquidity risk.

II

The Bulgarian National Bank (BNB) launched the Real Time Gross Settlement System (RTGS) RINGS in June 2003. According to the BNB, RINGS complies with the Core Principles for Systemically Important Payment Systems promulgated by the Committee on Payment and Settlement Systems of the Bank for International Settlements (BIS) and the standards of the ECB. (BNB website) However, there is no further information publicly available as to Bulgaria's compliance with this Principle.

According to the 2002 International Monetary Fund (IMF) Financial System Stability Assessment (FSSA) of Bulgaria, the payments that are made through the BISERA (Banking Integrated System for Electronic Transfers) 3 Automated Clearing House for retail payments are by definition made in central bank money. (IMF 2002, p. 64)

VII. The system should ensure a high degree of security and operational reliability and should have contingency arrangements for timely completion of daily processing.

II

The Bulgarian National Bank (BNB) launched the Real Time Gross Settlement System (RTGS) RINGS in June 2003. According to the BNB, RINGS complies with the Core Principles for Systemically Important Payment Systems promulgated by the Committee on Payment and Settlement Systems of the Bank for International Settlements (BIS) and the standards of the ECB. (BNB website) However, there is no further information publicly available as to Bulgaria's compliance with this Principle.

The 2002 International Monetary Fund (IMF) Financial System Stability Assessment (FSSA) of Bulgaria states that although the BISERA (Banking Integrated System for Electronic Transfers) 3, the Automated Clearing House for retail payments, uses BANKNET (a communication system for banks and corporates supplied and operated by BankService) as the message transmission system, with an electronic signature and encryption system based on dynamic key management, as of 2002, it continued to rely on diskettes for fallback communication between each bank and the BankService processing centres. (IMF 2002, p. 65)

Among its recommendation, the International Monetary Fund (IMF) suggests in its 2002 FSSA, that the BNB should regularly inspect and verify the security and integrity of each bank's internal systems for processing and releasing large-value payments. (IMF 2002, p. 67)

According to the BNB, the RINGS system helps banks manage their liquidity. Commercial banks are able to perform real time monitoring of cash-flow dynamics and to be prepared in advance to cover pending payments. The schedule of submitting requests to RINGS also contributes to limiting risk since large debit positions are in the form of requests submitted earlier in the system day. In case of a queuing request, banks with insufficient funds would have time to cover their positions. (BNB 2004, p. 29)

BNB's price policy is based on the principles of complete recovery of expenses incurred on the system, optimizing payments flow, and reducing system risk. The system day has four periods and the lower price of transactions at the beginning of the day aims to encourage earlier payments and cut risk. Additional risk reductions in the national payment system continued to be a priority and a major part of BNB efforts to ensure financial stability. In meeting this major central bank commitment, a term of reference of a new version of the RINGS software was developed by the BNB to address the findings of a customer survey and meetings and discussions with banks' representatives and system operators. The new version will be tested and launched in due course. (BNB 2004, pp. 29-30 )

VIII. The system should provide a means of making payments which is practical for its users and efficient for the economy.

II

The Bulgarian National Bank (BNB) launched the Real Time Gross Settlement System (RTGS) RINGS in June 2003. According to the BNB, RINGS complies with the Core Principles for Systemically Important Payment Systems promulgated by the Committee on Payment and Settlement Systems of the Bank for International Settlements (BIS) and the standards of the ECB. (BNB website) However, there is no further information publicly available as to Bulgaria's compliance with this Principle.

RINGS settles transactions on a same-day basis and with immediate finality. All payments are settled in real time across the participant banks' correspondent accounts at the BNB. Net balances are shown on the participant banks' accounts when interbank settlement has been effected. Transactions are settled on a same-day settlement cycle through BISERA. After all the transactions are processed on BISERA, the net credit/debit positions are forwarded to the banks' RINGS settlement accounts for final settlement. (HSBC 2006)

According to the 2002 International Monetary Fund (IMF) Financial System Stability Assessment (FSSA) of Bulgaria, despite the apparent efficiency of the BankService processing function, and of the BANKNET communication system, the lack of any intra-day information to banks about credits to their accounts with the BNB (or about the non-receipt of anticipated credits) means that they are unable to manage their liquidity, so as to ensure the settlement in full of their daily submissions to BISERA (Banking Integrated System for Electronic Transfers) 3 - they are therefore unable to handle their customers' payment orders with certainty on the due date. (IMF 2002, p. 66)

According to the 2002 IMF assessment, the BNB should establish with the banks agreed, equitable and transparent bases for their contributions to the ongoing and the replacement costs of the RTGS. The BNB should ensure that banks receiving customer payments through the RTGS system are obliged to give the beneficiary customers value the same day. (IMF 2002, p. 68)

IX. The system should have objective and publicly disclosed criteria for participation, which permit fair and open access.

II

The Bulgarian National Bank (BNB) launched the Real Time Gross Settlement System (RTGS) RINGS in June 2003. According to the BNB, RINGS complies with the Core Principles for Systemically Important Payment Systems promulgated by the Committee on Payment and Settlement Systems of the Bank for International Settlements (BIS) and the standards of the ECB. (BNB website) However, there is no further information publicly available as to Bulgaria's compliance with this Principle.

RINGS respectively debits and credits the payors' and payees' accounts and transmits automatically-generated response messages. (HSBC 2006)

According to the 2002 International Monetary Fund (IMF) Financial System Stability Assessment (FSSA) of Bulgaria, participation in the BISERA (Banking Integrated System for Electronic Transfers) 3, the Automated Clearing House for retail payments, is obligatory for every licensed bank. (IMF 2002, p. 66)

According to banking regulations, as of 2002, any licensed bank in Bulgaria is obliged to make all interbank payments through BISERA (or directly through its account with the BNB in the case of certain specified types of payment). Banks whose licenses have been revoked are immediately excluded from the system. The bank branches also have direct access to BISERA (provided that the banks do not have an internal payment system). There are two non-bank financial institutions which also have direct access to BISERA: the Central Depository (CDAD) and BORICA. They act as settlement agents, the CDAD for payments related to securities transactions, and BORICA for interbank payments related to card transactions. They are authorized by their members to initiate interbank payment transactions on behalf of the member banks. As of February 19, 2001, the SEBRA system for electronic budget payments, which services the payments of budget entities, is included in BISERA. The state Treasury is a participant in BISERA. (ECB 2002, p. 24)

The BNB is the owner of the RTGS system and responsible for the system.s administration, regulation and management. The participants in the RTGS system are: (1) the BNB; (2) settlement participants; (3) licensed banking institutions (banks) within the meaning of the Law on Banks who maintain current accounts with the BNB; (4) the BNB's Fiscal Services Department . for payments among banks arising from transactions with government securities; and (5) system operators, i.e., institutions authorized by the Managing Board of the BNB to perform services relating to intermediation in interbank transfers and the settlement of funds transfers, including: (a) Bankservice AD . the organization servicing the interbank retail funds transfer system BISERA; (b) BORICA AD, the national operator of the bank cards payment system, BORICA; and (c) the CDAD for payments among banks arising from transactions with commercial securities. (ECB 2002, p. 29)

X. The system's governance arrangements should be effective, accountable and transparent.

II

The Bulgarian National Bank (BNB) launched the Real Time Gross Settlement System (RTGS) RINGS in June 2003. According to the BNB, RINGS complies with the Core Principles for Systemically Important Payment Systems promulgated by the Committee on Payment and Settlement Systems of the Bank for International Settlements (BIS) and the standards of the ECB. (BNB website) However, there is no further information publicly available as to Bulgaria's compliance with this Principle.

According to the 2002 International Monetary Fund (IMF) Financial System Stability Assessment (FSSA) of Bulgaria, regarding BISERA (Banking Integrated System for Electronic Transfers) 3, the Automated Clearing House for retail payments, it is not clear how effective a voice the smaller banks have in the decision-making process in BankService (despite the duty of the BNB Deputy Governor, who is chairman of BankService, to ensure fairness). (IMF 2002, p. 65)

The IMF suggests in its 2002 FSSA that the BNB should establish an on-going governance structure for the RTGS which will promote stability and efficiency and at the same time will protect the interests of the smaller banks. (IMF 2002, p. 68)

A. The central bank should define clearly its payment system objectives and should disclose publicly its role and major policies with respect to systemically important payment systems.

II

Under the Law on the Bulgarian National Bank (BNB), the BNB is to assist in the establishment and running of efficient payment mechanisms. The Law also provides that the Bulgarian National Bank may organize and operate payment systems and clearing offices to facilitate non-cash payments. In accordance with this Law, the BNB issued Regulation No. 3 on payments and Regulation No. 16 on payments initiated by bank cards. The BNB is directly involved in the operation of BISERA, the interbank settlement system of Bulgaria. The Bank is the major shareholder in Bankservice (the operator of BISERA) and the sole owner of BORICA, the national card payments operator. (ECB 2002, pp. 15, 17) However, there is no further information publicly available as to Bulgaria's compliance with this Principle.

The Law on the BNB defines the main roles of the BNB. The BNB assists in the establishment and functioning of an efficient payment mechanism. According to BNB Regulation No. 3, Article 3, the BNB organizes, regulates and supervises the national payment system. The BNB is responsible for compatibility and consistency of operating the national payment system. (Trifonova 2003, pp. 6, 17; ECB 2002, p. 15)

The Payment Systems Oversight Statute's main objective is the safe and efficient national payment system, compliant with the Core Principles of the Bank of International Settlements and the European Central Bank's standards. (Trifonova 2003, p. 18)

The BNB publishes all documents regulating the payment system's operation on the BNB website. The BNB's role related to the Systemically Important Payment Systems as to ownership, operations, oversight, settlement, and liquidity provider is clearly disclosed. (Trifonova 2003, p. 18)

The Payment Systems Oversight Division (PSOD) within the Bulgarian National Bank (BNB) consists of the Payment Systems Unit and the Securities Settlement Systems Unit. The PSOD clearly states its functional task with regards to oversight activities. (Trifonova 2003, p. 26)

According to the 2005 BNB Annual Report, limiting systemic risk and improving the reliability and efficiency of Bulgarian payment systems was the major goal of payment systems' supervisors. They monitor constantly the various national payment systems and assess the compatibility of the national payment system with the principles, standards, and recommendations of the Bank for International Settlements, the International Organization of Securities Commissions, the European Central Bank, and the European System of Central Banks. On this basis, the BNB makes recommendations for improving individual payment system operations. 2005 saw oversight inspections of: (1) the system for servicing customer payments initiated for execution at a designated time (BISERA); (2) the system for servicing bank card payments within Bulgaria (BORICA); (3) the system for servicing payments on transactions in government securities (SSDSK); and (4) the system for servicing payments on transactions in book-entry government securities (the Central Depository). The results showed high compliance with international standards and practice. Actions to further convergence mostly concern improving operator aptitude and adjusting the requirements for euro system participation. (BNB 2005, p. 31)

B. The central bank should ensure that the systems it operates comply with the Core Principles.

II

The Bulgarian National Bank (BNB) launched the Real Time Gross Settlement System (RTGS) RINGS in June 2003. According to the BNB, RINGS complies with the Core Principles for Systemically Important Payment Systems promulgated by the Committee on Payment and Settlement Systems of the Bank for International Settlements (BIS) and the standards of the ECB. (BNB website) However, there is no further information publicly available as to Bulgaria's compliance with this Principle.

According to the 2005 BNB Annual Report, limiting systemic risk and improving the reliability and efficiency of Bulgarian payment systems was the major goal of payment systems' supervisors. They monitor constantly the various national payment systems and assess the compatibility of the national payment system with the principles, standards, and recommendations of the Bank for International Settlements, the International Organization of Securities Commissions, the European Central Bank, and the European System of Central Banks. On this basis, the BNB makes recommendations for improving individual payment system operations. 2005 saw oversight inspections of: (1) the system for servicing customer payments initiated for execution at a designated time (BISERA); (2) the system for servicing bank card payments within Bulgaria (BORICA); (3) the system for servicing payments on transactions in government securities (SSDSK); and (4) the system for servicing payments on transactions in book-entry government securities (the Central Depository). The results showed high compliance with international standards and practice. Actions to further convergence mostly concern improving operator aptitude and adjusting the requirements for euro system participation. (BNB 2005, p. 31)

C. The central bank should oversee compliance with the Core Principles by systems it does not operate and it should have the ability to carry out this oversight.

II

The BNB uses oversight instruments such as collecting information, reviewing the legal and regulatory framework, conducts and provides assessments and recommendations of the payment systems with Core Principles in its oversight of BISERA (Banking Integrated System for Electronic Transfers), the BORICA (Banking Organization for Payments Initiated by Cards) and the Central Depository (systems the BNB does not operate). (Trifonova 2003, p. 23) However, there is no further information publicly available as to Bulgaria's compliance with this Principle.

However, according to the 2002 International Monetary Fund (IMF) Financial System Stability Assessment (FSSA) of Bulgaria, the BNB does not comply in full with its responsibilities for applying the Core Principles to BISERA (Banking Integrated System for Electronic Transfers) 3. This is demonstrated by the fact that the system does not full comply with CPSIPS. (IMF 2002, p. 62)

According to the 2005 BNB Annual Report, limiting systemic risk and improving the reliability and efficiency of Bulgarian payment systems was the major goal of payment systems' supervisors. They monitor constantly the various national payment systems and assess the compatibility of the national payment system with the principles, standards, and recommendations of the Bank for International Settlements, the International Organization of Securities Commissions, the European Central Bank, and the European System of Central Banks. On this basis, the BNB makes recommendations for improving individual payment system operations. 2005 saw oversight inspections of: (1) the system for servicing customer payments initiated for execution at a designated time (BISERA); (2) the system for servicing bank card payments within Bulgaria (BORICA); (3) the system for servicing payments on transactions in government securities (SSDSK); and (4) the system for servicing payments on transactions in book-entry government securities (the Central Depository). The results showed high compliance with international standards and practice. Actions to further convergence mostly concern improving operator aptitude and adjusting the requirements for euro system participation. (BNB 2005, p. 31)

D. The central bank, in promoting payment system safety and efficiency through the Core Principles, should cooperate with other central banks and with any other relevant domestic or foreign authorities.

II

According to the 2002 International Monetary Fund (IMF) Financial System Stability Assessment (FSSA) of Bulgaria, the BNB should establish detailed contacts with the central banks, and the banking supervisors, in Greece, the Netherlands, Turkey and the USA, with a view to exchanging information in respect of the commercial banks from their countries in the RTGS. (IMF 2002, p. 68) However, there is no further information publicly available as to Bulgaria's compliance with this Principle.

The Payment System Oversight Division is required by the Law on the BNB to cooperate with the Banking Supervision Department of the BNB. It also cooperates with the Financial Supervision Commission (FSC). (Trifonova 2003, p. 28)

The central bank informs the European Commission of the operators and participants in payment systems, as well as of the termination of licenses for payment system operation. (Sofia Echo 2005)