Bulgarian Central Bank Deputy Resigns Amidst Eurozone Ascension Process
On Friday, March 1 Dimitar Kostov, the Bulgarian Central Bank Deputy Governor, announced his unexpected formal resignation from the post. Kostov, a key figure in Bulgaria’s impending transition into the Eurozone, had reportedly attempted to step down earlier last year but held off amidst Bulgaria’s ongoing negotiations with the EU regarding its financial ascendance into the European Banking Union. The resignation abruptly comes midway through a six-year term committed to in 2015, and leaves Bulgaria still underway in European Central Bank reviews to join the Eurozone.
Kostov has been a debated figure in the position of Central Bank Deputy Governor, given his historical involvement with various banking collapses in Bulgaria. Under Zhan Videnov’s socialist government in the 1990s, Kostov served as finance minister during a severe banking crisis. Moreover, Kostov also served on the board of the Bulgarian National Bank when in 2014 the major scandal surrounding the Corporate Commercial Bank, commonly known as CorpBank, unraveled leading the bank’s later insolvency. CorpBank was the fourth largest lender in Bulgaria at the time, and Kostov was supposedly a figure entrusted to build up Bulgarian corporate confidence in the aftermath.
As a result of the financial malfeasance in the country’s history, Bulgaria’s transition into the Eurozone has not been done hastily. The European Central Bank put Bulgaria in what has been termed the Eurozone “waiting room” since last year. While Bulgaria fulfills baseline criteria for adopting the euro, its history of embezzlement and fraud, coupled with Bulgaria’s lagging GDP per capita output rates in comparison to overall European levels have engendered those on the side of the European Central Bank with an air of caution.
Following an agreement reached last July, Bulgaria’s time in the Eurozone “waiting room” precedes its expected ascendance into the European Banking Union’s financial oversight system and the ERM-II, the exchange rate mechanism of the EU. However, the waiting process involves a series of comprehensive assessments focused on six major Bulgarian banking institutions. These assessments concentrate on asset quality review and stress tests on the banks, as a precursor and prerequisite to establishing formally “close cooperation” with the European Central Bank.
The assessments were commenced in November of last year by the European Central Bank, and are slated to be complete by July 2019. Amidst these procedures came the resignation of Dimitar Kostov, which to some has raised curious red flags but to others appears to be a foreseen stepping down. Kostov claims to be stepping down in order to ensure that a new deputy with sufficient time horizons for the fulfillment of the ascension process can take his place. A new Deputy Governor has yet to be announced.