Bulgaria ready to join ERM II in July - c-bank

"I expect development within the following three months," Radev said in an interview for private channel bTV published on the website of the central bank last week.

The process of entering ERM-II is now back on track after it was halted for several months, the governor noted.

According to Radev, the swap line agreement between the Bulgarian National Bank (BNB) and the European Central Bank (ECB) is not a legal requirement for ERM II entry but it can be beneficial.

Last month, BNB and the ECB agreed to set up a 2 billion euro ($2.2 billion) precautionary currency agreement (a swap line) to provide euro liquidity. The swap line will remain in place until the end of 2020, unless it is extended, the BNB said back then.

Outside of the technical framework, the swap line agreement is a sign of trust towards Bulgaria and its central bank, it shows that the country has a good financial reputation, Radev said, adding that this is especially important given the current coronavirus crisis.

Radev noted that according to the ECB, the swap line with BNB will remain in force as long as needed which means that it is not a temporary or one-time commitment, but rather an an example of intensified cooperation.

Banks in Bulgaria do not need euro liquidity right now, Radev said, noting that the swap line is a kind of guarantee.

According to Radev, the financial sector and the banks are much more well prepared to meet the devastating effect of the economic crisis now compared to 2008. The current coronavirus crisis, however, could be significantly deeper.

($ = 0.916287 euro)