- Bulgaria has no euro-adoption target on possible Brexit
- Bulgarian banks stress test results seen in ‘normal range’
Concern the U.K. may vote to leave the European Union adds to uncertainties in the euro-area’s future policies toward new members and Bulgaria needs to carefully weigh the consequences before starting euro-adoption talks, Petar Andronov, chairman of the Association of Banks in Bulgaria, said.
“For sure there will be a wave of market shocks, at least in the short term,” Andronov, who is also the chief executive officer of Sibank AD, a unit of KBC Groep NV, said in an interview in Sofia on Tuesday. “Certainly there will be political speculation on further similar scenarios and there will be a response from the European Commission to strengthen trust and integration. No one can predict all the consequences of a possible Brexit.”
Equity indexes from Russia to South Africa and Turkey dropped at least 1 percent as investors sold riskier assets after polls favored Britain’s “Leave” campaign before the June 23 referendum. Bulgaria is conducting an asset quality review of its lenders to evaluate the stability of its financial system before taking the first steps to euro-area entry talks. The Black Sea country has no definitive deadline to adopt the single currency, Andronov said.
“Past political decisions to admit countries in the euro area on political grounds are now replaced with decisions not to admit,” Andronov said. “It became obvious that the incompatibility of financial markets and economies, their mechanical adjustment to the euro area just on political ambitions isn’t the best decision. On the other hand, the decision for membership needs to be weighed with all the pluses and minuses.”
Bulgaria, the poorest EU state in terms of per-capita output, contacted the European Central Bank in 2014 to start the procedure to join the Single Supervisory Mechanism after runs on deposits triggered the worst financial crisis in 17 years, from which the nation has since recovered. The country started a banking industry health check this year required by the ECB as a preliminary step toward oversight from Frankfurt, which will be completed in August.
“The asset quality review is on schedule, we’re at the stage of stress tests already,” Andronov said. “The banking system started the assets review with good indicators, so I suppose the results will be within the normal range.”
Bulgaria will benefit more if it joins ECB’s oversight as one of the countries sharing the euro, Andronov said. Seeking ECB oversight of its lenders as a non-euro state would mean that “the supervisor bears no responsibility for the consequences of the supervision,” the consequences “remain a national problem,” he said. “It would resemble a doctor’s diagnosis of an illness without the treatment.”