Andrey Gyurov questions the political independence of the BNB

The case of the leaked video recording, which shows how the deputy governor of the BNB, who heads the “Issue” department, plays a leading role in opening the election campaign of a mayoral candidate nominated by “We Continue the Change”, is not just another blunder in our public space. Even secondary issues are issues such as whether the person in question traveled to Blagoevgrad and back in a company car, and whether this happened during working or non-working hours. The case is more than just an example of a lack of political culture and inadequate behavior on the part of the leadership of one of the most important institutions in the country. This is a serious violation of basic ethical principles and the rules for political independence that should unconditionally guide a central bank. Especially in the European Union and against the backdrop of plans to join the eurozone.

Andrey Gyurov has recently headed the "Issue" department, which represents the currency board in Bulgaria. This is one of the most responsible and complex institutions, a cornerstone of financial stability in our country for over a quarter of a century. An institution with probably one of the highest ratings, enjoying high trust, equivalent to the trust in the Bulgarian lev and the fixed exchange rate to the euro. At least until now, the high professionalism in the management of our currency board has not been questioned.

The political independence of the BNB is a key condition and an essential element for the successful implementation of the central bank's objectives. The primary objective of the BNB, as set out in Art. 2 of the BNB Law, is to maintain price stability in Bulgaria. The currency board is the mechanism for achieving this objective. Andrey Gyurov heads the currency board and in his actions must fully comply with the principles and restrictions described in the law, including the principle of full political independence.

Central bank independence is not just a theoretical wish, but is enshrined as a priority in European Union legislation. For example, the independence of the ECB is enshrined in the institutional framework for monetary policy (in the EU Treaty and in the Statute of the European System of Central Banks). The ECB website ¹ states literally:

"Political independence

The independence of the ECB contributes to maintaining price stability. This is supported by extensive theoretical analyses and empirical evidence on central bank independence.

Practical consequences

Neither the ECB, nor the national central banks (NCBs), nor any of the members of their decision-making bodies have the right to seek or take instructions from EU institutions or bodies, from a government of an EU Member State or from any other body.

"The EU institutions and bodies and the governments of the Member States must respect this principle and not seek to influence the members of the ECB's decision-making bodies (Article 130 of the Treaty)."

Against this background, how does the ridiculous behavior of the deputy governor of the BNB stand? Are we not witnessing a violation of not only principles, but also legal norms?

The scandalous behavior of Andrey Gyurov unequivocally betrays a continuing political bias and commitment to a party in which he had a political career until recently. We can only guess what other addictions Mr. Gyurov still has, and how they influence his actions as a senior manager at the BNB.

For his responsibilities at the BNB, and to better protect his independence, the deputy governor receives a considerable monthly salary of 19,745 leva ². This is according to official information from publications of the central bank. According to those familiar with the remuneration practice at the BNB, the actual amount increases many times over as a result of receiving regular bonuses in the form of additional monthly salaries. However, this is clearly not enough to preserve Mr. Gyurov's political independence.

This leads to some unpleasant conclusions:

• If the BNB leadership openly demonstrates political bias, political dependence is likely returning to the BNB to a degree unknown since 1989.
• In the event of the violation of legal norms and principles, as well as the violation of standard professional ethics, Andrey Gyurov ceases to meet the requirements of the BNB Law, for which he should be dismissed early from his position.

The case also gives rise to the following logical questions:

• How will the European institutions, in particular the ECB, look at the case when they assess "under a magnifying glass" the readiness for eurozone membership of the BNB and Bulgarian institutions in general?
• Will the violation of political independence in a national central bank be passed over in silence in Brussels and Frankfurt?
• Will a politically captured institution be allowed to access information and make decisions affecting the entire eurozone?

We dare not think that the tens of billions of the currency board, which Andrey Gyurov decides on by law, will go to the benefit of a certain party. Nor that the BNB will license and exercise “preferential” supervision for banks or other financial institutions associated with political parties or party leaders. Nor that the BNB will restore “PPOs” (the so-called primary party organizations that existed in every Bulgarian enterprise and institution until 1990).

However, the behavior of the Deputy Governor of the BNB is a pretext for even more specific doubts, which perhaps no longer seem so unfounded, for example:

• Do certain parties have priority access to information and special influence in the BNB?
• Is it an isolated or established practice for BNB leaders and employees to participate in activities and appearances in favor of specific political parties?
• Are employees of the Issue Department or other structures in the BNB subject to political pressure?

1 See https://www.ecb.europa.eu/ecb/orga/independence/html/index.bg.html

2 See page 12 of the BNB Budget for 2023:

https://www.bnb.bg/bnbweb/groups/public/documents/bnb_publication/pub_p_budgetbnb_2023_bg.pdf

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