Bulgaria announced on Monday that it would seek to join a new EU set of rules known as the 'banking union' after poor bank supervision led to the collapse of its fourth-biggest lender.
"There is full consensus for an immediate start of procedures for Bulgaria's entry into the Single Supervisory System of the European Union as a first step to joining the EU's 'banking union'," President Rosen Plevneliev said on Monday.
The new oversight system is expected to become operational in November under the European Central Bank to supervise the eurozone banks and prevent bank failures.
Bulgaria, which joined the EU in 2007, still remains outside the eurozone but it operates an IMF-led currency board arrangement that pegs its lev currency to the euro at a fixed rate.
The statement came after a crisis meeting of central bank and government officials and the leaders of the main political parties in parliament in an effort to shore up distressed depositors of Corporate Commercial Bank (CCB) after a run forced it to close temporarily on June 20 and seek protection against insolvency.
The crisis and a subsequent run on another bank, that was however backed by the government on time and held firm, sparked concerns of a repeat of a devastating banking crisis in 1996-7 when 14 banks went bankrupt.
An independent audit at CCB has since shown actions "incompatible" with good banking practices and central bank regulations, scorching all hopes that the bank could be recapitalised and reopened.
The central bank said last week that it would close it.
In order to compensate depositors, CCB's good assets and deposits would be transferred into a small subsidiary, Credit Agricole Bulgaria, a former unit of the French bank Credit Agricole that will be nationalised, it added.
Bulgarian bank deposits -- like those of depositors across the EU -- are guaranteed by law up to 196,000 leva (100,000 euros, $136,000) and Plevneliev said on Monday that the deposit insurance fund and the government have enough resources to pay that out.
Government estimates showed that a total of some 2.0 billion leva more would be needed if the government wanted to repay all good deposits in full but Plevneliev said that the talks on Monday failed to reach agreement on that.
Instead, an international audit would be performed at CCB while the central bank would ask the European Banking Authority to test the efficiency of its supervision, Plevneliev said.
The political leaders and the government also agreed to raise the budget deficit target to 3.0 percent of output from the planned 1.8-percent target and up the debt ceiling in order to give the government more room for crisis response manoeuvres.