Bulgaria sees July decision on entering euro "waiting room"
SOFIA, Feb 21 (Reuters) - Bulgaria's bid to join the euro zone's "waiting room" will be reviewed in July, Prime Minister Boyko Borissov said on Friday, urging the local banks to closely monitor their capital adequacy until then to avoid new obstacles to euro adoption.
Sofia, which has one of the lowest public debt levels in the European Union, initially planned to join both the two-year obligatory precursor to the euro zone, the ERM-2, and the bloc's banking union at the end of April.
Bulgaria is EU's poorest and most corrupt member state, but has been taking steps to boost people's incomes, fight endemic graft and streamline banking supervision.
It has met most of the requirements for entry to the two EU structures except for the successful recapitalisation of two locally owned banks at which the European Central Bank (ECB) found capital shortfalls during a health-check last year.
"The timing is not April, but July. This is when both Bulgaria and Croatia will be reviewed," Borissov told reporters after meeting European Commission Vice President Valdis Dombrovskis in Brussels.
"Until then the Bulgarian banks should monitor very carefully their capital adequacy so that we do not face any additional obstacles," he said.
The ECB's comprehensive assessment in July found Bulgaria's fifth largest lender, First Investment Bank (Fibank), had a capital shortfall of 263 million euros ($284 million), while smaller Investbank came up short by 52 million euros.
Both have to prop up their capital by the end of April, with Fibank planning to raise up to 200 million levs on the local bourse among other steps.
But on Thursday, the country's financial regulator refused to approve Fibank's prospectus, putting more pressure on the lender to meet its recapitalisation plan's timeline. The bank said it would amend its prospectus and resubmit it shortly.
In another bid to calm fears that ERM-2 entry may devalue the lev currency, which is pegged to the euro, and hit people's savings, Borissov reiterated the fixed exchange rate will be kept until Sofia adopts the common currency.
Dombrovskis also said that changing the current exchange rate made no economic sense and was highly unlikely. ($1 = 0.9259 euros)
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Reporting by Tsvetelia Tsolova; Editing by Toby Chopra
Our Standards: The Thomson Reuters Trust Principles.
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