UPDATE 2-Bulgarian central bank governor ready to step down

Tue Jul 22, 2014 11:45am EDT

* Governor writes letter to parliament

* Says central bank is not a political "toy"

* Main opposition party demands governor's resignation

* Governor blames lawmakers for derailing bank rescue

* Government expected to resign on Wednesday (Adds quote, details, background throughout)

By Tsvetelia Tsolova

SOFIA, July 22 (Reuters) - Bulgaria's Central Bank Governor Ivan Iskrov told parliament on Tuesday he was ready to step down if it can agree on a successor first.

In a letter, first reported by Reuters and then subsequently published with a statement on the central bank's website, Iskrov said he would not let the bank be used as a political "toy" ahead of a general election due to be held in October.

The central bank has been attacked for its handling of Bulgaria's worst banking crisis since the 1990s, in which Corporate Commercial Bank (Corpbank), the country's fourth largest lender, shut after a run on deposits in June.

Depositors, unnerved by reports of shady deals involving Corpbank's main owner, withdrew more than a fifth of deposits in a week-long bank run. The owner, who was also locked in a public feud with a business rival at the time, denied wrongdoing and said the run was a plot hatched by his competitors.

During the run, news also leaked that the central bank deputy governor in charge of banking supervision was being investigated for abuse of office. Iskrov said at the time that the leak was tantamount to a deliberate "attack" on Corpbank's credibility. The deputy has taken a voluntary leave of absence and has not commented publicly on the investigation.

The central bank and the government have pursued various options to put Corpbank back on its feet, including a rescue package under which the bank's healthy assets and liabilities would be hived off into a subsidiary.

However, that plan was rejected by lawmakers in July. The main opposition GERB party, which is tipped to win the October election, has demanded Iskrov's resignation and said the central bank should take responsibility for the Corpbank crisis.

Prime Minister Plamen Oresharksi's technocrat government is expected to step down on Wednesday, after the ruling Socialist party's poor performance in May's European elections.

"The governor of the Bulgarian National Bank has sent a letter to the National Assembly, in which he expresses his readiness to resign if the assembly musters an agreement to choose a new governor," the central bank's spokesman said.

"The aim is not to leave the central bank without management during a continuing political crisis," he said.

POLITICAL "TOY"

Under Bulgarian law, the governor has to step down three months after announcing his resignation. If lawmakers cannot agree on a successor, it could leave the bank without a governor - which is why Iskrov stipulated that the current parliament must find a replacement first.

If his proposal is accepted, there is a limited time frame for him to step down. The current parliament will be dissolved in early August to make way for an interim government, appointed by the president, which will rule for two months.

"I definitely do not accept the ongoing attempts for the Bulgarian National Bank to be used as an electoral party toy through personal attacks against its governor," Iskrov said in the letter to the parliament.

Iskrov, who was known for keeping a low public profile until the Corpbank crisis erupted, is in his second term as governor and his tenure expires in October 2015.

In the letter he said initial talks with Brussels on the plan to move Corpbank's assets to a subsidiary had indicated support from the European Union for the plan, as had a promise by the government to protect all of Corpbank's depositors.

The run on Corpbank prompted the central bank to seize control of the lender for three months, block depositors from taking out money and commission an audit of Corpbank's books.

Sofia has estimated the public rescue cost at about 1.5-2 billion Bulgarian levs ($1-1.4 billion). The results of the audit showed activities in the bank "incompatible with the law and good banking practices", according to the central bank. It also said that crucial information about Corpbank's loan portfolio was missing.

Originally the central bank had proposed reopening Corpbank on July 21, a plan that Iskrov in his letter said was scuppered by a lack of political consensus on how to deal with the fallout of the bank run.

($1 = 1.4498 Bulgarian Levs) (Writing by Matthias Williams Editing by Jeremy Gaunt)