"... In PAGE 2: ...( Table1 ). Following the recent adoption by the UK1 and Luxembourg of the separation approach, only six EU member countries have the central bank as the only authority responsible for banking supervision.... In PAGE 3: ...2 These functions are in the realm of the competent national authorities. In most EU countries the central bank plays a role here, albeit that the supervision is often entrusted to another agency (see Table1 ). Limiting the ECB functions to monetary policy is part of a general trend of withdrawal from supervisory functions in central banking and fits with the home country control principles of the single market.... ..."

"... In PAGE 11: ...98E-06 0 Source: The ratios are based on the results of the mentioned questionnaire and the World Bank data on population (1999). In Table2 the most recent ratios (for 1999) of total staff/population, economic staff/population and research staff/population for the national central banks in the EU are given. These staff ratios show large differences both in terms of total staffing and in economic (and research) staffing for central banks performing similar functions as the operationals arms of the ESCB.... In PAGE 11: ... The ECB performs different, strategic functions as the directorate of the ESCB and is, consequently, excluded from this table. It is clear from Table2 that especially the central banks of Greece and Belgium have a huge total staff in relation to their population size. The opposite is true for Luxembourg, Germany, the United Kingdom and Sweden.... ..."

"... In PAGE 18: ... Domestic credit. The majority of bank assets are in low-risk domestic and foreign securities and placements ( Table1 0, Appendix I). Commercial bank loans represent less than one-third of banks apos; total assets.... In PAGE 20: ...4 and percent; and deposit rates low, 3.24 percent ( Table1 2, Appendix I). Although a record low since 1993, the average lending spread (about 9 percent in 1999) is still high by international standards.... In PAGE 20: ...X z inflation. The banking sector earnings Z Basic interestrate Interbankr during 1997-99 ( Table1 3, Appendix I) - - -Short-ter credits -Time rdepositse depended on noninterest income since the high operating expenses added as nmuch as 6 percent to the cost of funds in large state banks, exceeding the net interest income of the sector. Spreads are expected to decline further as competition increases with privatization; reserve requirements are lowered in June 2000 from 11 to 8 percent; and, as some of the large banks start to expand their business services and products, especially to the retail-consumer banking areas.... In PAGE 21: ...unctions. Total risk-weighted capital adequacy increased from 10.2 percent in June 1997 to 41.8 percent by December 1999 ( Table1 4, Appendix I). After the large-loan loss provisions made in 1997 and 1998, the average pretax profit on total assets soared from about 0.... In PAGE 23: ... Of the total banking sector assets, state banks hold close to 54 percent, Bulgarian national banks 4 percent, and foreign shareholder banks or branches about 39 percent. As Table1 below indicates, state ownership of banking sector assets is still among the highest in the region, second only to Romania (75 percent) and far above Estonia (7.8 percent), Latvia (8.... In PAGE 23: ...ercent), Latvia (8.5 percent) and Hungary (11.8 percent). But this picture is likely to change dramatically with the privatization of two of the largest state-owned banks, Bulbank and Biochim, by the end of 2000. Table1 : Privatization in the Banking Sector in Selected Countries in Europe Comparision with Central and Eastern European Countries 1998 Asset share of Asset share of Number of Of which state-owned foreign-owned banks majority banks (%) banks (%)* foreign- owned Belarus 59.5 2 37 3 Bulgaria1 59.... In PAGE 24: ...The bulk of the banking system is in the hands of 12 banks, five of which are state-owned. The top 12 banks hold 85 percent of banking sector assets, 87 percent of total deposits and 80 percent of total loans ( Table1 7, Appendix I). The largest bank is Bulbank, the forner foreign trade bank, with a 27 percent market share.... In PAGE 25: ... Overall, the banking sector is gaining credibility As of December 1999, the Bulgarian banking sector has high solvency and liquidity. Overall, risk-weighted capital adequacy under IAS is about 42 percent ( Table1 4, Appendix I), far above the required 10 percent. Classified loans (below standard) have declined to 13.... In PAGE 25: ...bove the required 10 percent. Classified loans (below standard) have declined to 13.8 percent of total loans from 17.6 percent at the end of 1997 ( Table1 1, Appendix 1). The majority of the past earnings have been used to build up loan loss provisions.... In PAGE 31: ... The estimates for total market capitalization for the listed companies are about 1.1 billion BGN ( Table1 7, Appendix I). The value of the shares not held by the Government and available for the trading on the BSE is estimated at about half this amount.... In PAGE 52: ...Table1 0: Commercial Banks Indicators 1995 1996 1997 1998 1999 Number of commercial banks 44 47 34 34 35 Assets (BGN million) 1,087 3,631 7,361 7,594 8,186 Assets (US$ billion) 15.4 7.... In PAGE 53: ...Table1 1: Domestic Credit Real, end ofperiod (BGN 1995 1996 1997 1998 1999 thousand) Domestic credit 634,674 488,594 184,001 149,836 141,353 BGN 415,917 159,618 37,098 48,185 35,890 Foreign exchange 218,757 328,976 146,903 101,650 105,463 Claims on government sector, net 283,354 219,045 58,805 18,070 5,205 BGN 212,949 102,618 3,727 -7,863 -28,142 Foreign exchange 70,405 116,427 55,077 25,934 33,348 Claims on non-financial public sector 161,238 112,489 44,923 33,519 23,787 BGN 96,577 23,141 12,044 10,632 7,208 Foreign exchange 64,661 89,348 32,879 22,887 16,579 Claims on Private Sector 190,082 157,060 80273 98,247 112,361 BGN 106,391 33,859 21,327 45,417 56,825 Foreign exchange 83,691 123,201 58,946 52,830 55,536 Memo items: Domestic credit as % of GDP 67.4 61.... In PAGE 54: ...Table1 2: Interest Rates (end of period) (Annualized %)34 1995 1996 1997 1998 1999 Base interest rate 38.59 342.... In PAGE 54: ...89 8.87 Source: Bulgarian National Bank and World Bank staff estimates Table1 3: Income Statement of the Banking Sector (in million BGN) 1997 1998 1999 Interest income 777 469 451 Interest expenses 547 144 130 Net interest income 229 325 321 Gains or losses on securities 4 -157 -20 Trading and revaluation on foreign exchange 1,388 -19 124 Comnmissions and fees 63 99 171 Loan loss provisions -1,107 -336 -10 Income before Operating Expenses 578 585 606 Operating Expenses 267 375 394 Income before Extraordinary Items 311 210 212 Other financial revenue 247 -21 0 Extraordinary income 7 17 75 Income before Taxes 565 206 286 Net income 369 129 207 Source: Bulgarian National Bank 34 Annualized interest rates are based on monthly weighted averages. 35 Marginal spread is calculated as (l+il)/(l+id)-l.... In PAGE 55: ...Table1 4: Capital Adequacy of Commercial Banks L. Major Banks] 11.... In PAGE 56: ...Table1 5: Actual and Theoretical Provisions in the Banking Sector 1997 1998 1999 Dec Mar Jun Sep Dec Mar Jun Sep Dec Loans (million BGN) 3,806 3,898 4,119 4,541 5,849 5,903 4,428 4,944 5,042 Standard (in percent) 78.8 80.... In PAGE 57: ...Table1 6: Size and Ownership Structure of the Banks, September 1999 Rank Total Assets Equity by assets in BGN niillion State-Owned Banks Bulbank 1 2,102.2 258.... In PAGE 58: ...Table1 7: Banking Sector Ranking: The Top Dozen Bank Assets Bank Loans Bank Deposits (BGN (BGN (BGN milli mmillion) 1 Bulbank 2102.2 1 State Saving Bank 518.... In PAGE 59: ...Table1 8: Bulgarian Stock Exchange Official Market Free Market Block Segment A Segment C Trade Market No. of Market No.... In PAGE 62: ... The associate governments are also allowed to mix the sequencing of the Stage 1 and 2 measures if necessary. Table1 attached to the appendix lists these directives. The directives chosen for the first stage are those which introduce the basic principles for the establishment of the financial institutions while the measures in the second stage aim in particular to strengthen the prudential regulation to bring the credit institutions up to prescribed EU standards.... ..."