July 18 (SeeNews) - Bulgaria's government said on Wednesday it mandated the finance minister to apply for the country's participation in the Single Supervisory Mechanism, one of the two pillars of the EU banking union, through requesting close cooperation with the European Central Bank (ECB).
The decision comes after the finance ministers of the euro area member states said last week they would support Bulgaria's intention to join the Exchange Rate Mechanism (ERM 2) - the euro's waiting room, the government said in a statement.
The close cooperation will be established by a decision of the ECB, provided that the conditions laid down in Article 7 of Regulation (EU) No 1024/2013 are met, according to the statement.
The finance ministers of the euro area member states and the ECB said last week that Bulgaria could simultaneously join the ERM II and the banking union after a positive assessment of ECB, which will take up to one year to be completed.
The ECB is expected to conclude its comprehensive assessment within approximately one year after Bulgaria's formal application for close cooperation.
"We call on the Bulgarian authorities to thoroughly implement the reforms monitored by the Commission under the Cooperation and Verification Mechanism in the areas of judicial reform and the fight against corruption and organised crime in Bulgaria, in light of their importance for the stability and integrity of the financial system," the finance ministers of the euro area said last week.
Earlier this month, Bulgarian finance minister Valdislav Goranov and central bank governor Dimitar Radev said in a letter of commitment that Bulgaria expects to simultaneously join ERM II and the banking union by July 2019.
In the letter, the country committed to improve banking supervision by entering into close cooperation with the ECB, to strengthen insolvency and anti-money laundering frameworks, enhancing supervision of the non-banking financial sector.
In May this year, the ECB and the European Commission said the country is not prepared to join the eurozone as it does not meet all criteria. The ECB said that Bulgaria should deal with macroeconomic imbalances, and needs to adopt laws to preserve central bank independence, in order to meet criteria for joining the eurozone.
The European Commission said in its convergence report published together with the ECB's report that Bulgaria does not fulfil the conditions for the adoption of the euro as its legislation, and its law on the central bank in particular, is not fully compatible with the requirements of the treaty on the functioning of the EU.