the ecb by the treaties, let me focus here on readiness and the role of erm ii in the euro area accession process. erm ii was introduced in 1999 as one of the ways to assess a country ’ s convergence with the euro area. the mechanism not only enables exchange rates between the non - euro area member state ’ s currencies and the euro to be managed, 7it also, and most importantly, is a way to test the sustainability of convergence before and after euro adoption. the ecb plays a central role in erm ii. it is the operational hub of the system. the ecb ’ s 1 / 4 bis central bankers'speeches general council, which includes the governors of euro area and non - euro area central banks, monitors the operation of erm ii and ensures that monetary and exchange rate policies are coordinated. the general council also administers the intervention mechanisms together with the member state ’ s central bank. the ecb is also one of the parties that decide whether a given currency can be admitted to join erm ii. to take this decision, it prepares annual reports on the functioning of the mechanism. and together with the european commission it assesses whether a country ’ s participation in erm ii has been sustainable. the last wave of countries joined erm ii in 2004 - 05 and subsequently joined the euro area. 8 from that experience, we have gained a better understanding of the regime shift that erm ii entails for participating countries. it became clear that participating in erm ii alters the economic incentives of international and local investors as well as those of the authorities of the participating countries. evidence suggests, in particular, that after a country joins erm ii, it may experience large and volatile short - term capital inflows. especially if coupled with a weak institutional set - up, this may set the wrong incentives, leading to the postponement of necessary reforms and a deterioration in the country ’ s adjustment capacity. we have learned lessons from the financial crisis related to sustainable convergence that have led to reforms in the architecture of economic and monetary union, such as the establishment of the banking union. these lessons were taken into account when designing the path of bulgaria and croatia towards erm ii. both countries made prior commitments that were designed to ensure that their participation in erm ii would be smooth. the fulfilment of these commitments was carefully monitored and assessed by both the ecb and the european commission in their respective fields of competence.

be provided for denmark if the country requests them. given the absence of such a request, the ecb ’ s 2020 convergence report examines the following countries : bulgaria, the czech republic, croatia, hungary, poland, romania and sweden. 6 article 140 of the treaty on the functioning of the european union says that at least once every two years, or at the request of an eu member state with a derogation, the ecb and the european commission must report to the eu council “ on the progress made by the member states with a derogation in fulfilling their obligations regarding the achievement of economic and monetary union ”. 7 the main general features of erm ii are : ( i ) a central exchange rate against the euro ; ( ii ) a fluctuation band with a standard width of ±15 % around the central rate ; ( iii ) central bank interventions at the margins of the agreed fluctuation band ; ( iv ) the availability of very short - term financing from participating national central banks. the participating national central banks can, however, unilaterally commit to tighter exchange rate regimes than those provided for by erm ii, without imposing any additional obligations on the ecb. this is now the case with bulgaria, which has joined erm ii with its currency board, like estonia and lithuania did in the past. 8 estonia, lithuania and slovenia joined erm ii in 2004 ; cyprus, latvia, malta and slovakia joined erm ii in 2005. 9 for the ecb, these are banking supervision and macroprudential policy. the ecb ’ s assessment of the erm ii prior commitments on the macroprudential toolkit is available on the ecb ’ s website. see “ ecb assessment report on completion of the commitments made by the republic of bulgaria on the macroprudential toolkit ” and “ ecb assessment report on completion of the commitments made by the republic of croatia on the macroprudential toolkit ”, ecb, 10 july 2020. 10 for bulgaria, these policies include enhancing non - banking supervision, improving the insolvency framework and strengthening the governance of state - owned enterprises. for croatia, they include reforming the collection and production of national statistics, enhancing public sector governance and reducing the administrative and financial burden. the european commission ’ s assessment of the erm ii prior commitments on structural policies is available on its website. see “ letter by executive - vice president dombrovskis and commissioner gentiloni to