A new cash service company was established in July with the aim of cutting banks expenses. The company, called Cash Services Company (CSC), was created by Bulgarian National Bank (BNB) in co-operation with three commercial banks: DSK Bank, United Bulgarian Bank (UBB) and UniCredit Bulbank. Each of the four financial institutions owns 25 per cent in CSC ,which is scheduled to start operation as of January 1 2008.
The purpose of CSC is to manage the distribution and servicing of banknotes circulating on the market. Its creation was prompted by the amendments to Ordinance 18 on the control over the quality of banknotes and coins in circulation. The company will count cash, replace damaged bank notes and feed bank offices with resources, currently a responsibility of each bank. CSC will have offices in five cities: Sofia, Plovdiv, Varna, Bourgas and Pleven. CSC will serve both BNB and the commercial banks. It is thought everyone will benefit from the deal. As BNB has been the institution so far responsible for cash services, it will bring its experience to the newly formed CSC. The new company will take over part of BNBs present functions as well. The other advantage that CSC will have in terms of BNB and its policy in the banking sector is that through CSC, BNB will have another tool to maintain and control the quality of the banknotes circulating on the market. Besides its experience in the field BNB will supply its offices in Plovdiv, Varna and Pleven.
BNB will run a cash outlet in Sofia for those who do not want to use the services of the cash company. However, despite the fact that each of the banks owns a 25 per cent stake in CSC, BNB will preserve the ownership over its offices. The commercial banks, on the other hand, will bring fresh investment to the partnership.
The idea of this type of company is not a new one. So far, if banking institutions wanted to guarantee the high quality of banknotes in circulation, they had to use sorting machines, which separated the damaged banknotes and coins from the high quality ones.
However, this kind of equipment is expensive and time consuming and few banks use it. With the creation of the CSC, every bank in the country, or citizen, will be able to sort its banknotes for a certain fee of course. How much the services provided by CSC will cost is still unclear, but the idea of CSC was welcomed by banks mainly because creating such a company will save banks money. The will not have to run some additional operations and will be able to focus on improving their services, according to UBBs executive director Radka Toncheva, as quoted by Bulgarian-language Pari daily.
At the beginning of 2007, it was projected that creating CSC would cost seven million leva. In August, however, the situation is slightly different and now CSC can rely on issued capital of 10 million leva. According to Miroslav Vichev, CSC board of directors member and executive director of DSK Bank, the capital of CSC will be sufficient for the company to operate normally for at least four to five years.
The company will also continue to be stable in the future as other banks will join it, Vichev said, as quoted by Pari daily. The same opinion was shared by Levon Hampartzoumian, UniCredit Bulbank CEO and chairman of the Bulgarian Banks association.
