ivan iskrov : growth and the financial system – lessons from emerging europe with a focus on bulgaria speech by mr ivan iskrov, governor of the bulgarian national bank, at the conference on “ achieving sustainable growth in south east europe : macroeconomic policies, structural reforms, socio - political support, and a sound financial system ”, organised by the bank of greece and st antony ’ s college ( oxford ), athens, 11 february 2011. * * * ladies and gentlemen, it is a pleasure to be here at this conference, organised by the bank of greece together with st. antony ’ s college, oxford. above all, let me thank governor provopoulos for the invitation and the opportunity to come here and, together with my distinguished colleagues from south east europe, to be able to talk before such a reputable audience. as a central banker, certainly the financial industry is of direct interest to me. but although the topic of this panel is “ growth and the financial system ”, i would also like to go beyond it and touch upon other issues discussed so far today. politics and politicians do matter the topics of the panels overlap and the four main sessions are arranged in a very logical sequence. i am saying this, because the financial sector does not function in isolation from the rest of the economy and the political stance. a strong financial system cannot co - exist with a fragile economy and political instability ( at least not for long ). the opposite is also true : weak financial markets and weak institutions hamper the sustainable growth. for example, the recent crisis drew the attention to the banking industry, many times blamed to have caused the global turmoil. there is no use repeating now how guilty the banks are, that is, the well - known sequence of events : the “ sub - prime ” lending, the “ toxic ” assets, the need to bail out banks and the subsequent economic and fiscal dimensions of the crisis. however, we should not turn a blind eye to the root cause : the role of politics and politicians. what about the call for “ affordable housing ” which was dominating the political ideology in the last two decades in the us ( and not only there )? what about the related environment of low policy rates, coupled with the failure of regulators to identify and control systemic risks? was that not really at the root of the asset bubbles and risky behaviour of the banks? we all know the answers. the “ greedy ” bankers are not the only ones to blame. learning from emerging europe

the recovery and resolution of credit institutions and investment firms. the part involving the bnb was finalised at the end of last year and is due for submission to the national assembly with legal amendments likely to get adopted by the end of this quarter. the bnb governor also outlined the second work block in this direction, on which the bnb is currently working, i. e., the overall framework of determining the amount of funds to be contributed by banks to the single resolution fund and the amount and way of transferring funds from the bank resolution fund in bulgaria, which was set up in 2015, to the single resolution fund. the third work block covers the overall activity of planning and conducting resolution activities, including the distribution of responsibilities and tasks between the single resolution board and the bnb after our country joins the banking union. with regard to the expected effects on the economy and the business, the bnb governor highlighted that it was positive to reaffirm bulgaria ’ s strategic course, and that the process is already being filled with content and specific timeframe. the whole process stands as a positive counterbalance against the more general uncertainty from the global and european economic environment. 1 / 2 bis central bankers'speeches among the more direct positive effects from this first stage on the path to the euro area is the anticipated improvement of the country ’ s credit rating, as announced by the credit agencies, should the process run successfully in the short - term. that would improve the funding conditions in the country. at the same time, the effects of joining erm ii will not be tangible in regard to the macroeconomic policy and neither will our monetary regime change. the bnb governor made it clear that the only exit from the current regime would be the replacement of the lev with the euro at the currently fixed exchange rate. the whole process of accession – first to the banking union and erm ii, and next to the euro area – could not substitute for the good macroeconomic practices and business projects, mr. radev said. a country refusing to comply with this is sure to suffer serious economic and financial difficulties whether inside or outside the euro area. the two proven pillars of good macroeconomic policy in bulgaria are the fiscal stability and the monetary regime stability. should these conditions, together with the continuous improvement of institutions, be present, the preparatory process and subsequently the accession to the euro area would be a catalyst for the social and economic prosperity of our country. 2 / 2 bis central bankers'speeches