The euro area is the union of those Member States of the European Union (EU) that have adopted the euro as their national currency. The common currency, the single monetary policy aiming at price stability, and the coordination of economic and fiscal policies are key features of the Economic and Monetary Union (EMU). All newly accessed EU Member States participate in the EMU with a derogation in respect of the common currency and the single monetary policy until they join the euro area (except Denmark), thus also becoming full-fledged participants in the Economic and Monetary Union.

When the euro was first introduced in 1999 — first for non-cash payments in commercial and financial transactions — the euro area was composed of 11 out of the then 15 EU Member States. The number of participating countries increased to 12 on 1 January 2001 with the accession of Greece, just one year before the emergence of the available form of the euro as banknotes and coins. On 1 January 2007, Slovenia became the 13th member of the euro area, followed a year later by Cyprus and Malta, by Slovakia on 1 January 2009, Estonia on 1 January 2011, Latvia on 1 January 2014, Lithuania on 1 January 2015 and Croatia on 1 January 2023.

All EU Member States have an obligation to join the euro area when they fulfil the necessary conditions for the introduction of the euro but until then they participate in the Economic and Monetary Union of the EU as a Member State with a derogation. The only exception is Denmark, which has the right to opt out referred to in a protocol annexed to the Treaty, although it may introduce the euro in the future, if it decides to do so.

Andorra, Monaco, San Marino and the Vatican have adopted the euro as their national currency under special monetary agreements with the EU and can issue their own euro coins within certain limits. Montenegro and Kosovo have also adopted the euro as their national currency, however with unilateral acts. Since none of the six countries is a member of the EU, they are not part of the euro area.

There are 20 euro area Member States and these are: Austria, Belgium, Croatia, Cyprus, Estonia, Finland, France, Germany, Greece, Italy, Ireland, Latvia, Lithuania, Luxembourg, Malta, the Netherlands, Portugal, Slovakia, Slovenia, and Spain.

Under the Treaty on the Functioning of the European Union, the European Central Bank (ECB) and the national central banks (NCBs) of all EU Member States, regardless of whether they have adopted the euro or not, form the European System of Central Banks (ESCB). With the accession of Bulgaria to the EU on 1 January 2007, the Bulgarian National Bank is part of the ESCB.

The ECB and the national central banks of the Member States whose currency is the euro together constitute the Eurosystem.

The ECB was established as the centre of the Eurosystem and the ESCB and is based in Frankfurt am Main, Germany. The ESCB and the Eurosystem will coexist as long as there are EU Member States that have not adopted the euro as their currency.

The main objective of the Eurosystem is to maintain price stability while preserving the value of the euro. By keeping inflation low, stable and predictable, it aims to assist citizens and businesses in planning their savings and spending. The goal is tomorrow people to be able to buy with their money as much as today. Through its Governing Council, a single monetary authority with a single monetary policy and a primary objective of maintaining price stability, the ECB determines the monetary policy of the entire euro area.

The ECB contributes to the security and stability of the European banking system, develops and issues euro banknotes, manages and maintains the orderly functioning of the payment systems and facilitates the safeguarding of financial stability.

Achieving nominal and sustainable cohesion is the condition for membership under the EU Treaty which our country must fulfil. The achievement of such convergence is determined by the fulfilment of the criteria for euro area membership, as defined in the Maastricht Treaty, namely:

• Price stability criterion according to which the average inflation rate does not exceed by more than 1.5 percentage points the average inflation rate in the three best performing Member States in terms of price stability;
• The government deficit does not exceed 3% of GDP;
• Government debt does not exceed 60% of GDP;
• The average nominal long-term interest rate measured by the yield of the ten-year government bonds denominated in national currency over a period of one year before the valuation does not exceed by more than 2 percentage points the average of the benchmark for the three best performing Member States in terms of price stability;
• Participation of the national currency in ERM II for a period of at least two years prior to the valuation, without depreciation against the central rate to the euro.

Along with the implementation of legal, economic and structural measures aimed at strengthening the competitiveness and the resilience of the economy, the path towards a smooth adoption of the euro also involves in-depth planning and practical preparation for the adoption of the single currency by both administrations and businesses and citizens.

The euro offers many benefits to the citizens, businesses and economies of the countries that use it. Some of them are:

• easy price comparisons between euro area Member States, which increases competition between businesses, thus benefiting consumers;
• price stability;
• making it easier, cheaper and safer for companies to trade in the euro area and with the rest of the world;
• enhancing economic stability and growth;
• better integrated, thus more efficient financial markets;
• greater influence in the global economy through the use of the world’s second reserve currency;
• a tangible symbol of European identity.

Many of these benefits are interrelated. For example, economic stability benefits the economy of an EU Member State, as it makes it easier for the government to make strategic long-term decisions. Economic stability, however, is also beneficial for companies, as it reduces uncertainty and galvanises investment. This, in turn, benefits citizens because of increased employment and better quality jobs.

The Coordination Council for the preparation of the Republic of Bulgaria for euro area membership (hereinafter referred to as “the Council”) is responsible for organising, coordinating and monitoring the practical preparation of the Republic of Bulgaria for euro area membership. The Council is also responsible for the development, implementation and, if necessary, the update of the National Plan for the Introduction of the Euro in the Republic of Bulgaria.

Among its functions are the approval of documents, activities and initiatives related to the preparation for the adoption of the single European currency, as well as the periodic reporting to the Council of Ministers on the progress in the preparation. The Council was established as early as 2015 (by Decree No 168 of the Council of Ministers of 2015 establishing a Coordination Council for the preparation of the Republic of Bulgaria for euro-area membership), but its activity resumed after the accession of the Bulgarian lev to the Exchange Rate Mechanism II.

The Council is co-chaired by the Governor of the Bulgarian National Bank and the Minister of Finance, who is the national coordinator of the preparation of the Republic of Bulgaria for euro area membership.

The members of the Council are:

• The heads of the working groups who support with their expertise the work of the Council and whose scope of activity is described in the Plan for the Introduction of the Euro in the Republic of Bulgaria, including a deputy minister of finance, a deputy minister of economy and industry, the deputy governors of the Bulgarian National Bank and a member of the FSC;
• The deputy prime minister responsible for European fund management;
• A deputy minister of foreign affairs;
• A deputy minister of justice;
• A deputy minister of e-government;
• A deputy minister of interior;
• The chairman of the State National Security Agency;
• A deputy minister of transport and communications.

The website about the euro will be a major institutional channel for informing citizens and businesses about the introduction of the euro in Bulgaria. It will publish information about:

• Benefits of the introduction of the euro;
• Useful practical information, including time periods and ways to exchange currency and double price labelling, changes for citizens and businesses;
• Appearance and security features of the euro banknotes and coins;
• Good practices and experience of other countries that have adopted the euro;
• Documents governing the process of introducing the euro — the National Plan, the Law on the Introduction of the Euro, guidelines/recommendations related to the adoption of the euro in various sectors, etc.

Information will also be available on a special free telephone line which will be opened later. A mobile application is also planned to be developed. Its function will be to provide information and to enable the calculation of the value of goods and services from BGN in EUR and vice versa.

A comprehensive communication campaign will be carried out to inform citizens and businesses about the introduction of the euro. Various channels will be used to inform the public — TV channels, radio, social networks, online and print media, etc.

Exchanging levs for euros will take place under the current rate of BGN 1,95583 for EUR 1. The commitment of the Bulgarian authorities to join the euro area only with the current fixed rate is confirmed both in the National Plan for the Introduction of the Euro in the Republic of Bulgaria, adopted by the Council of Ministers in May 2022, and in the Decision of the National Assembly of 27 October 2022.

Currency conversion means the physical exchange of levs in cash for euros and the recalculation of prices, deposits, loans, financial instruments and other balance sheet items from BGN to EUR. The conversion will be carried out by applying the irrevocably fixed exchange rate of BGN 1,95583 to EUR 1 which will be confirmed by an amendment to Council Regulation (EC) No 2866/98 of 31 December 1998 on the conversion rates between the euro and the currencies of the Member States adopting the euro.

The conversion of prices and currencies from BGN to EUR will be carried out by applying the full digital amount of the fixed conversion rate, i.e. using all five decimal places. The resulting amount will be rounded to two decimal places on the basis of the third decimal place in accordance with the following mathematical rounding rule:

1. where the third decimal place is less than five, the second decimal place remains unchanged;
2. where the third decimal place is equal to or greater than five, the second decimal place increases by one.

Recalculation of prices at a rate other than the fixed exchange rate shall not be permitted. Additional fees and commissions for recalculation on consumers will not be allowed.

Since the date of Bulgaria’s membership in the euro area all types of accounts: current accounts, deposit accounts, current budgetary accounts, savings accounts, accrual accounts, liquidation accounts and other accounts with local banks, as well as payment accounts with other payment service providers (payment institutions and e-money companies) will be converted only once, automatically and free of charge into EUR. No transitional period will apply to these accounts. This means that as from the first day of adoption of the euro account holders will be able to withdraw from their BGN accounts only euro, regardless of whether the withdrawal will take place via an ATM/POS device or at an office of the payment service provider (bank, payment institution or e-money company). This is a quick and convenient way to exchange levs for euros, without a special commitment for the account holder himself. From the first day of the introduction of the euro non-cash payments will only be made in euro.

In the first month as from the date of the introduction of the single European currency in the Republic of Bulgaria, the lev and the euro will be in circulation simultaneously, with both currencies having the status of legal means of payment. After this one month elapses, the euro will remain the only legal means of payment in Bulgaria.

The one-month transition period will help ensure a gradual transition to the new currency. During this month, citizens will be able to pay in both currencies at retail outlets and service centres. On the other hand, traders have to return the change to their customers exclusively in euros, unless they can do so for practical reasons. Thus, in practice, some of the levs in circulation will be exchanged through traders and service providers, thus providing another exchange channel for Bulgarian citizens. However, pursuant to Council Regulation (EC) No 974/98 of 3 May 1998 on the introduction of the euro, a rule will be adopted according to which, during that transitional period, the trader may accept not more than 50 coins in levs and stotinki within one transaction with the buyer.

The conversion of bank accounts from BGN to EUR will take place on the day of the introduction of the euro. All funds in BGN on current, deposit, savings and other accounts with local banks and other payment service providers will be converted into euro free of charge on the day of the introduction of the euro. Therefore, in the months following the decision of the Council of the EU that Bulgaria is eligible for the adoption of the euro and before the introduction of the euro, citizens will be invited to deposit as many BGN notes and coins as possible in bank accounts. As from the day of the introduction of the euro in Bulgaria, all non-cash payments will be made in euro only.

From the date of the introduction of the euro, the Bulgarian National Bank will exchange free of charge, in unlimited quantity and without any time limit, BGN banknotes and coins for euro at the official exchange rate of BGN 1,95583 for EUR 1.

During the first six months as from the date of the introduction of the euro in Bulgaria, banks and Bulgarian Posts EAD will exchange BGN banknotes and coins for euro at the official exchange rate and free of charge.

Over the next six months, banks will continue exchanging banknotes and coins, but they will be allowed to charge a fee for this service.

After the first 12 months since the introduction of the euro expire, banks and Bulgarian Posts EAD will be able to terminate the service of exchanging banknotes and coins in cash.

In the first one month as from the date of the introduction of the euro in Bulgaria, the lev and the euro will be in circulation simultaneously, with both currencies having the status of legal means of payment (the so-called period of dual circulation of BGN and EUR). After this month elapses, the euro will remain the only currency of our country.

In the first month since the introduction of the euro, citizens will be able to pay in both currencies at retail outlets and service centres.

During this period, traders will be obliged to return the change to their customers in euros only. Only in case of objective impossibility, the trader will be entitled to return the change in cash in BGN or in BGN and EUR. In this way, another exchange channel will be provided for the exchange of BGN with EUR and for the withdrawal of the BGN from circulation.

Pursuant to Council Regulation (EC) No 974/98 of 3 May 1998 on the introduction of the euro, a rule will be adopted under which the trader may accept not more than 50 coins in BGN, including stotinki, in the course of one transaction with the buyer.

One month after the Council of the EU decides to adopt the euro in the Republic of Bulgaria, a requirement for mandatory indication of prices in BGN and EUR will enter into force. This obligation will continue to apply 12 months after the date of adoption of the euro.

The obligation for double price indication is planned to start one month after the Council Decision on the adoption of the euro in the Republic of Bulgaria and to remain in force 12 months after the adoption of the European currency. The experience of the Member States that introduced the euro most recently shows that this obligation has yielded very good results. It has helped prevent price increases by allowing consumers to easily identify traders and other businesses that have unduly increased prices.

Special attention will be paid to traders and service providers who should display the prices of their products and/or services in both currencies during the dual price indication period. During the same period, the indication of prices in BGN and in EUR should also be made in the promotional materials containing information about the prices of the services and/or products advertised.

Double price indication will also apply to public authorities. During this period, all amounts due by Bulgarian citizens to the state, including taxes, fees, etc., should be indicated in BGN and in EUR. The same applies to the amounts owed by the state to citizens. Public authorities should also prepare information materials about the double price indication and price lists with prices written in both currencies.

In order to facilitate the introduction of the euro, in the first month since the date of Bulgaria’s membership in the euro area, the change in cash, regardless of whether in BGN or in EUR, should be paid by traders in EUR only, unless there are objective reasons for not doing so. To this end, companies and traders will be provided with euro banknotes and coins even before the date of the introduction of the euro. A rule wills also apply according to which during the transitional period of circulation of both currencies the trader will not be obliged to receive more than 50 coins in BGN, including stotinki, in one transaction.

Replacing the lev with the euro will not lead to a double rising of the prices of goods and services.

The way of converting the prices of goods and services will be regulated in the Law on the Introduction of the Euro in the Republic of Bulgaria. It will explicitly provide that the conversion of BGN with EUR will be made by dividing the price in BGN by the full numerical value of the official exchange rate by all five decimal places. Conversion by using the abbreviated form of the official exchange rate will not be allowed. After the conversion, the resulting amount will be rounded to two decimal places on the basis of the third decimal place in accordance with the following mathematical rounding rule:

1. where the third decimal place is less than five, the second decimal place remains unchanged;
2. where the third decimal place is equal to or greater than five, the second decimal place increases by one.

A long period of dual display of the prices of goods and services is also envisaged in order to avoid any speculative rise in their prices as a result of the introduction of the euro. This period will start one month after the adoption of the Council of the European Union’s Decision on the introduction of the euro by the Republic of Bulgaria and will be in force 12 months after the date of its accession to the euro area. The aim of introducing the double labelling obligation is to make it easier for citizens to adapt to the new currency and to prevent abusive and speculative price increases.

Dual price indication in the EU Member States that have introduced the euro most recently has proven to be a successful measure in countering price hikes resulting from the introduction of the euro.

In order to encourage correct traders, the Ministry of Economy and Industry, together with the Consumer Protection Commission and representatives of non-governmental organisations, will organise a Fair Trader campaign with a clearly recognizable campaign logo. Those of the traders/service providers who comply with the rules for accurate indication of the prices of their products/services from BGN to EUR, as well as for a comprehensible and correct indication of prices during the double pricing period, will receive a Fair Trader sticker to inform consumers that they participate in the campaign. The institutions organising of the campaign will be responsible for the monitoring of the good trader practices, and citizens will be invited to participate in the process of gathering and transmitting information.

The experience of the last countries that joined the euro area shows that the immediate effect of entering the euro area on the price levels is an increase in inflation of around 0.3 – 0.5 %. At the same time, one should bear in mind that due to the catching economic effect and lower prices in Bulgaria compared to the EU, as well as the increase in energy prices and geopolitical turmoil in the last year, inflation in Bulgaria has grown.

It is expected that the introduction of the euro will have a minimal effect on price increases. If we take as an example the Republic of Croatia, the last country to join the euro area, we will see that according to Eurostat inflation in Croatia for January 2023 has increased by 0.2%. The annual inflation in January 2023 was 12.5%, in December 2022 – 12.7%, and in November 2022 – 13%.

The effect of the conversion to the euro in the total inflation in Slovenia was 0.3, in Slovakia – 0.15, in Estonia – 0.3, in Latvia – 0.2, and in Lithuania – 0.11 percentage points.

The Bulgarian National Bank and the Financial Supervision Commission, in accordance with their powers, will monitor compliance by the entities they supervise – commercial banks, insurance and pension companies, etc.

Main bodies regarding the control and sanctioning of the traders related to the introduction of the euro will be: the Consumer Protection Commission (CPC), the Commission for Protection of Competition, the National Revenue Agency (NRA) and the Economic Police Department of the Ministry of Interior. Each citizen will have the right to report violations to the CPC or to the relevant control body.

Traders who deliberately violate the rules for conversion or rounding will be sanctioned in accordance with the current legislation.

One can submit alerts through the website of the Consumer Protection Commission, on the euro webpage, as well as through the free telephone line for the euro, which will be opened 6 months before the date of introduction of the euro.

The salaries will be paid in euro after the date of introduction of the euro. The amounts in the employment contracts should be converted in favour of the employee, rounding the amount to the nearest eurocent. If the sign that follows the last sign to which the rounding is made is greater than 0, one unit should be added to the last sign or a new amount will be determined which would not be lower than that in BGN. Thus, in the case of conversion the sum of BGN 1500 will become EUR 766.94 and may be rounded by the employer at EUR 767.

From the date of Bulgaria's membership in the euro area, all accounts – payment, deposit, savings and other accounts in local banks – will be one-time, automatically and freely converted in euro.

There will be no transitional period for these accounts. This means that from the very first day of the euro adoption, the account holders will only be able to withdraw euro from their BGN accounts, no matter whether the withdrawal will be through ATM/POS device or in the office of a bank, payment institution or e-money company.

This is a quick and extremely convenient way to replace the levs with the euro without a special commitment for the account holder himself or herself.

From the very first day of the introduction of the euro, cashless payments will only be made in euro.

In the months before the introduction of the euro, citizens will be encouraged to deposit as many BGN-denominated banknotes and coins as possible into bank accounts. Having in mind that all BGN funds in the accounts will be converted free of charge into euro on the date of introduction of the euro, starting from that day, cashless payment transactions will be carried out only in euro.

From the date of the introduction of the euro, the Bulgarian National Bank will exchange for free, in an unlimited quantity and without a time limit, BGN-denominated banknotes and coins into euro at the official exchange rate of BGN 1.95583 for 1 euro.

In the first six months from the date of introduction of the euro in Bulgaria, banks and “Bulgarian Posts” EAD will exchange BGN-denominated banknotes and coins into euro at the cash desk free of charge at the official exchange rate.

In the next six months, banks will continue to exchange BGN-denominated banknotes and coins to euro, but they will have the right to charge a fee for this service.

After the expiration of the first 12 months of the introduction of the euro, banks and “Bulgarian Posts” EAD may suspend the service for exchanging BGN-denominated banknotes and coins to euro in cash.

With the introduction of the euro, all taxes, fees and other payments to the state and municipalities must be made in euro. An exception to this rule will be made in the period of the double circulation of the lev and the euro, i.e. one month from the date of introduction of the euro.

After the date of the introduction of the euro in Bulgaria, the refund of amounts unduly paid or collected before the introduction of the euro for taxes, state or municipal fees, mandatory insurance contributions, fines and property sanctions, and other public obligations, will be carried out in euro.

Amounts on tax returns will be stated in the currency that was legal tender at the end of the tax period for which the tax return is submitted. When the tax period for which the tax return is submitted ends during the period of double circulation the lev and the euro, the monetary values in the tax return should be indicated in euro.

In the process of introducing the euro, the principle of continuity of contracts will be applied. This means that:

• the introduction of the euro should not affect the validity of existing contracts with references to the lev;
• all values specified in BGN in the existing contracts will be considered as values in euro while applying the official exchange rate and the rounding rules specified in the Law on the Introduction of the Euro;
• the introduction of the euro does not lead to a change in any of the time periods in a contract or to an exemption from obligation or performance under any contract, nor does it entitle a party to unilaterally amend or terminate such a contract unless otherwise expressly agreed between the parties;
• the reference in contracts to the lev without specifying the value is considered a reference to the euro.

From the date of the introduction of the euro, all loans originally granted in BGN or loans with a currency clause in euro will be considered as loans in euro. It would not be allowed to use the introduction of the euro as a condition for renegotiation of clauses in contracts already concluded between banks and their customers or as a basis for other similar actions by banks in relation to their customers that would put them in a less favourable financial position relative to their position before the revaluation.

This will also apply to non-bank financial institutions that provide loans to customers.

Postage stamps, lotteries with a predetermined result, discount coupons, coupons for the value of returned goods, vouchers, including food vouchers and other bearer securities which were on sale or in circulation before the date of introduction of the euro and whose value is expressed in BGN can be used even after the date of introduction of the euro until their expiration date or until quantities are exhausted.

In the process of introducing the euro, the principle of efficiency and economy will be applied. According to this principle, the costs arising for individuals from the introduction of the euro as the currency of the Republic of Bulgaria are at their expense and are not compensated with public funds.

The revaluation of receivables and liabilities, the servicing of bank accounts and the transition to payments in euro are not expected to lead to additional costs for the companies clients of the banks.

The annual financial statements will be prepared in the currency that is in official circulation in the Republic of Bulgaria at the end of the reporting period, and the comparable data for the previous reporting period should be in the same currency.

With a view to defining a uniform accounting procedure upon the transition to the euro, the future Law on the Introduction of the Euro in the Republic of Bulgaria and/or other legal acts will implement legal changes related to:

• The preparation of accounting supporting documents, accounting registers and financial statements, where the valuation is in BGN;
• Procedures for currency conversion of capital and shares of companies into euro;
• Procedures for recording operations with cash registers during the transitional period in which payments in both BGN and EUR are accepted.

With the introduction of the euro, economic and public entities should conduct their financial reporting in the new currency, and the data for the previous accounting period should be converted into euro in order to ensure comparability between the current and previous period. The declarations and forms to be filled in by citizens and legal entities after the introduction of the euro with reference to tax and other liabilities to the state or receivables from the state for the period preceding the year of introduction of the euro, will include amounts in BGN. However, the payments themselves based on these liabilities and receivables will be made in euro, with the amounts converted into the new currency at the official fixed exchange rate.

The conversion of BGN into EUR for accounts with banks and other payment service providers will take place on the date of introduction of the euro. All funds in BGN in current, savings, custody and other accounts in local banks and other payment service providers will be converted into euro once and free of charge on the day of the introduction of the euro.

If the agreed interest rate on the deposit is fixed, the bank should continue to apply a fixed interest rate even after the introduction of the euro. The mechanism for transferring from a fixed interest rate in BGN to a fixed interest rate in EUR should not lead to less favourable conditions or results for the parties to the transaction – both for the client and for the bank. In this regard, the transition from a fixed interest rate in BGN to a fixed interest rate in EUR should be determined according to the bank's methodology, guaranteeing that the resulting interest payment in EUR is equivalent to that in BGN on the date of currency conversion.

If the deposit is agreed with a variable interest rate, this parameter will be modified in a manner regulated in the provisions of the Law on the Introduction of the Euro. The transition from a variable interest rate in BGN to a variable interest rate in EUR should be determined according to the bank's methodology, guaranteeing that the resulting interest payment in EUR is equivalent to that in BGN on the date of currency conversion. Unlike cash, whose conversion is a relatively time-consuming and logistically more difficult task, money held in bank accounts and in payment accounts with other payment service providers will be converted into euro immediately, with no transition period required. In the months before the introduction of the euro, citizens will be invited to deposit as many BGN-denominated banknotes and coins as possible in bank accounts. Having in mind that all BGN funds in the accounts will be converted into euro on the day of the introduction of the euro, starting from that day, cashless payment transactions will be carried out exclusively in euro.

From the day of the introduction of the euro, all loans originally granted in BGN or loans with a currency clause in euro will be considered as loans in euro. It would not be allowed to use the currency conversion as a condition for renegotiation of clauses of already concluded contracts between the banks and their customers or as a basis for other similar actions by the banks in relation to their customers, which would put them in a less favourable financial position compared to their position before the currency conversion. The same will apply to non-bank financial institutions that provide loans to customers.

The introduction of the euro does not require changes to the existing loan contracts, regardless of whether they are loans in BGN or loans with a currency clause in euros, as the issue of their currency conversion will be regulated by the Law on the Introduction of the Euro. In particular, the Law on the Introduction of the Euro will provide that the credit agreements remain in force and BGN-denominated amounts in those agreements will be considered as amounts in euro, with the conversion being made according to the official fixed rate expressed to five decimal places; those amounts will be rounded according to the rules laid down in the future Law on the Introduction of the Euro.

If the agreed interest rate on the loan is fixed, the bank should continue to apply a fixed interest rate even after the introduction of the euro.

The mechanism for transferring from a fixed interest rate in BGN to a fixed interest rate in EUR should not lead to less favourable conditions or results for the parties to the transaction – both for the client and for the bank. In this regard, the transition from a fixed interest rate in BGN to a fixed interest rate in EUR should be determined according to the bank's methodology, guaranteeing that the resulting interest payment in EUR is equivalent to that in BGN on the date of currency conversion.

If the loan is contracted with a variable interest rate, this parameter will be modified in a manner regulated by the provisions of the Law on the Introduction of the Euro. The transition from a variable interest rate in BGN to a variable interest rate in EUR should be determined according to the bank's methodology, guaranteeing that the resulting interest payment in EUR is equivalent to that in BGN on the date of currency conversion.

In this context, the financial situation of the debtor should not be a reason for deterioration of the interest parameters under the contract. The change of the reference interest rates from BGN to EUR should be carried out in a sufficiently justified and transparent manner, which does not aggravate the financial situation of the clients and does not lead to additional costs compared to the interest costs that the client would have incurred in the BGN equivalent of his/her liability.

Banks and other financial institutions will have to inform their customers about the upcoming changes in advance (e.g. three months) before the official conversion to the euro, including by disclosing their interest rate recalculation algorithm on their websites.

From the date of the introduction of the euro, all government securities originally denominated in BGN will be automatically converted into EUR. Despite the prevailing volumes of government debt in the balance sheets of banks and financial institutions, there are also other forms of debt investments denominated in BGN – mostly investments in senior and subordinated debts (bonds) issued by financial and non-financial companies on the Bulgarian market, as well as investments in shares of Bulgarian companies registered in the Central Depository. The value of the investments in such securities should also be converted into EUR, including the accumulated fair value revaluation and amortization reserves of the debt instruments to date. The change in the nominal value of debt securities and shares in the central securities register is carried out by the Central Depository.

If the agreed interest rate on the securities or other financial instruments is fixed, the issuer should continue to apply a fixed interest rate even after the introduction of the euro.

The mechanism for transferring from a fixed interest rate in BGN to a fixed interest rate in EUR should not lead to less favourable conditions or results for the parties to the transaction – both for the client and for the bank. In this regard, the transition from a fixed interest rate in BGN to a fixed interest rate in EUR should be determined according to the bank's methodology, guaranteeing that the resulting interest payment in EUR is equivalent to that in BGN on the date of currency conversion.

If the securities or other financial instruments are contracted with a variable interest rate, this parameter will be modified in a manner regulated by the provisions of the Law on the Introduction of the Euro. The transition from a variable interest rate in BGN to a variable interest rate in EUR should be determined according to the issuer’s methodology, guaranteeing that the resulting interest payment in EUR is equivalent to that in BGN on the date of currency conversion.

The change in the nominal value of collateral pledged/mortgaged in favour of banks and financial institutions should be automatically reflected through the register of special pledges and/or the property register. In order to protect the interests of the persons who have established the collateral, no other changes are allowed as to the value of the pledged/mortgaged property as a result of the automatic conversion from BGN to EUR – i.e. the replacement of BGN with EUR should not be used as a reason to change (both upwards and downwards) the value of the collateral.