THE EURO, banking... and you

Transcription

1 THE EURO, banking... and you

2 CONTENTS INTRODUCTION 1 KEY DATES TO NOTE 2 HOW CASH WILL BE CHANGED FOR EURO 4 HOW ACCOUNTS WILL BE CONVERTED TO EURO 6 HOW EXISTING CREDIT FACILITIES WILL BE TREATED 6 HOW CHEQUE PAYMENTS WILL BE MADE IN EURO 7 EXCHANGE RATES AND INTEREST RATES 8 DUAL DISPLAY OF PRICES AND MONETARY VALUES 9 HOW AUTOMATED TELLER MACHINES (ATMs) WILL OPERATE IN EURO 10 HOW CARD TRANSACTIONS WILL BE HANDLED IN EURO 11 FURTHER INFORMATION 12 REF: Oct-07

3 INTRODUCTION On 1 January 2008 ( -day), Malta will adopt the euro as its national currency and will officially join the euro area. On that day, euro banknotes and coins will come into circulation, and the withdrawal from circulation of Maltese lira (Lm) banknotes and coins will commence. For a limited period from 1 January to 31 January 2008 (referred to as the dual circulation period ), Lm banknotes and coins will circulate alongside euro banknotes and coins. Businesses would have to accept both euro and Lm in cash, but give change in euro. However, after midnight on 31 January 2008, the euro will become the only currency with legal tender status in Malta. Non-cash transactions will have to be denominated exclusively in euro as from -day. Where and when will you obtain euro cash? How will your bank accounts be converted from Lm to euro? Will your existing debit and credit cards continue to operate? What about cheques? These are just some of the questions that are answered, simply and concisely, on the following pages. This booklet has been prepared by the Malta Bankers Association on behalf of its member banks for the benefit of their customers and the general public. REF: Oct-07 THE EURO, banking... and you 1

4 KEY DATES TO NOTE Monday, 31 December 2007 Banks will open for business as usual. This is the last day for writing cheques in Lm. If possible, holders of cheques denominated in Lm should endeavour to deposit / encash such cheques before the year-end. A number of Automated Teller Machines (ATMs) will continue dispensing Lm notes until p.m., after which all ATMs will be out of service until midnight. Tuesday, 1 January 2008 ( -day) Banks will be closed, as usual, for the public holiday. Euro banknotes and coins come into circulation, and the dual circulation period begins. ATMs will start dispensing euro banknotes. Electronic point-of-sale (EPOS) terminals will be converted automatically to euro. Cheques should only be written in euro as from this date. Thursday, 31 January 2008 The dual circulation period comes to an end at midnight, after which the Lm loses its legal tender status, and will no longer be accepted as a means of payment. Saturday, 29 March 2008 Banks will continue to accept Lm cash deposits and to exchange Lm banknotes and coins to euro banknotes and coins across their counters up till close of business on 29 March 2008 (see How cash will be changed for euro on page 4). Thereafter, it will only be possible to exchange Lm cash at the Central Bank of Malta, up to 1 February 2010 for Lm coins and 31 January 2018 for Lm banknotes. No charges will be applied by the Central Bank. Wednesday, 2 January 2008 and Thursday, 3 January 2008 Banks will open and the commercial banks (listed on page 12) will extend their normal banking hours to 4 p.m. However, throughout these two days, services to the public by these banks shall be restricted solely to cash deposits in both Maltese lira and euro, cash exchanges from Maltese lira to euro and exchange of foreign currency banknotes into euro banknotes and coins, so that the banks can focus on the work involved in converting all their systems. Euro banknotes will be available from all ATMs. Friday, 4 January 2008 and Saturday, 5 January 2008 The commercial banks will resume full banking services. Their normal banking hours will be extended till 4 p.m. During normal hours, all business will be conducted as usual. During the extended hours, only cash deposits in Maltese lira and euro, cash exchanges from Maltese lira to euro and exchange of foreign currency banknotes into euro will be handled. 2 THE EURO, banking... and you

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6 HOW CASH WILL BE CHANGED FOR EURO Before 1 January 2008 As -day gets closer, you should use or deposit into your account all Lm banknotes and coins that are surplus to your normal daily requirements. This will facilitate matters after -day, ease the pressure on bank counters during the cash changeover period, and reduce the security risks which may arise if large volumes of cash are left to be exchanged during that period. Euro coin starter kits, intended for retailers or other small businesses needing only small amounts of euro coins, will be on sale from all bank branches as from 1 December These will contain euro coins with a face value of 131(Lm56.24). Euro coin mini kits containing a mix of euro coins with a face value of (Lm5) will also be available for sale to the general public from all bank branches as from 10 December Purchasers of starter/mini kits will be charged the exact Lm equivalent at the irrevocably fixed conversion rate of The euro coins will not be legal tender until 1 January 2008 and should not be used before that date. During December 2007, small amounts of euro banknotes in 5 denominations may also be purchased from the banks at the irrevocably fixed conversion rate of , subject to availability of the euro banknotes. This is mainly intended to enable small businesses to acquire some euro banknotes ahead of the changeover. Such businesses are encouraged to discuss their likely requirements with their bankers prior to December Businesses requiring larger amounts of euro banknotes and coins in preparation for -day (e.g. large supermarkets, casinos, etc.) will have to make sub-frontloading arrangements in advance with their bankers. This involves the supply of the required euro cash float by banks to such businesses prior to -day, subject to a number of conditions, including the precondition that the euro banknotes and coins so provided cannot be dispensed to the general public before -day. These conditions, which reflect European Central Bank Guidelines, will be incorporated in the sub-frontloading contract which must be entered into between the business customers concerned and their banks. The amount of cash sub-frontloaded will be debited to the accounts of these customers after -day. Any arrangements regarding extended repayment terms or security to be provided will have to be agreed between the parties. 4 THE EURO, banking... and you

7 Between 1 January 2008 and 31 March 2008 During this three month period, banks will continue to accept Lm cash deposits into customers euro accounts at no charge, using the irrevocably fixed conversion rate of Such deposits may also continue to be made via ATMs / Deposit Machines. Separate deposit forms / envelopes should be used for Lm and for euro deposits. After 31 March 2008 Banks will no longer accept or exchange Lm banknotes and coins. These will remain redeemable at the Central Bank of Malta for ten years in the case of banknotes, and for two years in the case of coins. The ten and two year periods both start to run from 31 January 2008, which marks the end of the legal tender status of the Maltese lira. As from 1 January 2008, ATMs will only dispense cash in euro. Between 2 January 2008 and 29 March 2008, banks will also exchange across their counters Lm banknotes and coins into euro banknotes and coins at the irrevocably fixed conversion rate of and without any handling charges. Such exchanges will be carried out for banks customers without limitation, but may be subject to a two days notice period if the amount to be exchanged exceeds Lm250 ( ). Cash exchanges for non-customers will also be effected free of charge during that period, but limited to a maximum amount of Lm250 per person. In order to facilitate the deposit or exchange of Lm coins by the general public, the banks will be providing small, specially produced plastic bags in which Lm coins are to be sorted by denomination prior to effecting the deposit or exchange. It is important that Lm coins are pre-sorted in this manner in order to expedite processing. THE EURO, banking... and you 5

8 HOW ACCOUNTS WILL BE CONVERTED TO EURO In line with the Big Bang approach adopted by Government for the adoption of the euro, all your Lm denominated accounts, including credit card accounts, will be converted automatically into euro on -day. This will be done free of charge at the irrevocably fixed conversion rate of All existing account numbers will remain unchanged. The first account statement of 2008 will provide details of the conversion of Lm balances to euro effected on -day. All holders of previously Lm denominated current and savings accounts up to 31 December 2007 will receive an account statement, reflecting such conversion, within the first quarter of 2008 or upon request if required prior to such dispatch by the bank. HOW EXISTING CREDIT FACILITIES WILL BE TREATED Upon euro adoption, monetary values in Lm will be regarded as values in euro converted at the irrevocably fixed conversion rate of As such, no amendments will be required to any existing sanction letters, hypothecary deeds, other security documents, etc., as all contracts or obligations involving Lm amounts will be automatically converted into euro obligations at the irrevocably fixed conversion rate upon adoption of the euro. Debit Interest Rates see Exchange Rates and Interest Rates on page 8. From 1 January 2008, all deposits and withdrawals will be processed in euro, and all existing standing orders and direct debits for regular loan/bill payments will be converted automatically to euro. 6 THE EURO, banking... and you

9 HOW CHEQUE PAYMENTS WILL BE MADE IN EURO As all bank accounts which are denominated in Lm will remain so denominated until 31 December 2007, it follows that you should continue to issue cheques in Lm right up to the end of December 2007, but should start issuing cheques in euro as from 1 January Banks may opt, in the course of 2007, to issue cheque books with no currency symbol printed on them. In that event, you will be required to fill in the appropriate currency symbol when writing out a cheque i.e. Lm if a cheque is issued prior to 1 January 2008, and if a cheque is issued after 31 December As from 1 January 2008, cheque books bearing the euro currency symbol will be provided, on request, to holders of previously Lm denominated current accounts. Cheques issued in Lm prior to 1 January 2008, but presented for encashment after 31 December 2007, will be honoured if presented within the normally accepted validity periods i.e. within six months from date of issue, unless a shorter validity period is specifically indicated on the cheque, in which case the shorter period will apply. The Lm amount will be converted into euro at the irrevocably fixed conversion rate of , and the relative euro equivalent will be debited to the drawer s account and paid to the presenter of the cheque. No commission or other banking charges will apply. In the interest of facilitating the changeover to euro, holders of Lm cheques are strongly encouraged to deposit / encash such cheques prior to 1 January 2008, if possible, or as soon as possible after that date. Cheques drawn on Lm denominated accounts and issued in euro prior to 1 January 2008 will be dishonoured if presented before that date. However, such cheques will be paid for their full value if presented after 31 December 2007 and within the normally accepted validity periods. Cheque forms bearing the Lm currency symbol and remaining in your possession after 31 December 2007 could still be used to write out cheques in euro provided: The printed Lm symbol is struck off (see example below), and The euro currency symbol ( ) is written in lieu, and the amount in words also clearly denotes the euro as the currency in which the cheque is written, and You sign your full signature against these alterations. Failure to comply with the above requirements would be sufficient reason for banks to dishonour the relative cheques. Cheques which are drawn in euro on local bank accounts which are also denominated in euro will be honoured, subject to the usual reserves, whether drawn and/or presented before 1 January 2008 or thereafter. Such cheques should normally only be used to effect payments in Malta. If they are used abroad, they will take longer to process and may attract clearing and other administration charges. Likewise, cheques drawn in euro on foreign banks and presented locally will also take longer to process and may attract clearing and other charges. Cheques issued in Lm after 31 December 2007 will be dishonoured. THE EURO, banking... and you 7

10 EXCHANGE RATES AND INTEREST RATES Exchange rates On 1 January 2008, Malta will adopt the euro as its national currency, and will officially join the euro area. Until then, the Maltese lira alone will be legal tender in Malta, and the status of the euro will remain that of a foreign currency. The euro/lm conversion rate was irrevocably fixed by the European Council at 1 = Lm on 10 July Prior to adoption of the euro, the exchange of Lm for euro, and vice versa, by the banks will continue to attract an exchange charge. However, to facilitate the euro adoption process as -day approaches, the banks have agreed that as from 1 December 2007, they will undertake Lm/euro exchanges at the irrevocably fixed conversion rate of , without the application of exchange charges. Normal commission and other banking charges on specific transactions will continue to apply (e.g. commission on inward and outward SWIFT transfers, negotiation of foreign cheques, issue of local and foreign bank drafts, etc.). The foregoing does not imply that the actual exchange of Lm banknotes and coins into euro banknotes and coins will commence prior to -day, other than for limited purposes see How cash will be changed for euro Before 1 January 2008 on page 4. Additionally, as from 11 July 2007, banks are accepting deposits of euro banknotes at the irrevocably fixed conversion rate when such banknotes are deposited into Lm accounts by their business customers. This allows retailers to charge the euro equivalent displayed on their price tags, without adding any charges, when payment is tendered in euro by purchasers. This arrangement is limited to takings in euro, accepted by such businesses over their counters in the normal course of business, and not to euro banknotes acquired through the exchange of such banknotes for Maltese lira with no relation to any underlying sale of goods or services. Interest Rates Debit and credit interest rates will converge to euro interest rates upon adoption of the euro on 1 January However, where a fixed rate was agreed between you and your bank in relation to a Term Deposit or a credit facility for a period which extends beyond -day, that fixed rate will continue to apply up to the end of the agreed period, notwithstanding the conversion of the relative account balance from Lm to euro on -day. Interest paid / charged by banks on retail deposits / borrowings in Lm is calculated on an Actual Number of Days / 365 Days basis. However, in the case of euro balances, the predominant market practice is for banks to calculate interest on an Actual Number of Days / 360 Days basis. Therefore upon changeover to the euro on 1 January 2008, and in the absence of any notification to the contrary by your bank, the latter basis of calculation will be applied to both deposits and borrowings in euro. However, in the case of deposits or loans in Lm for which a fixed interest rate has been agreed, and whose term to maturity extends beyond 31 December 2007, the current Actual / 365 Days basis of calculation will continue to be applied until maturity of the fixed rate agreement (e.g. a fifteen year loan in Lm may have been granted in 2005, with a fixed rate of interest agreed for the first five years. Therefore a 365 days base will continue to apply until maturity of the five year fixed interest period in 2010, whilst a 360 days base will start to apply thereafter). 8 THE EURO, banking... and you

11 DUAL DISPLAY OF PRICES AND MONETARY VALUES Dual display in both Lm and euro is being shown by banks: i. against the final balance on all bank statements, including credit card statements; ii. on banks tariffs detailing their charges for all services and transactions; iii. on ATM Fast Cash screen displays for the withdrawal of cash; iv. on bank websites where price tariffs and other monetary amounts are displayed (excluding internet banking). Additionally, dual display is being shown in respect of the following transactions in Lm undertaken across branch counters: i. Lm deposits of cash/cheques into current and savings accounts; ii. Lm cash withdrawals from savings accounts; iii. closure of Lm current and savings accounts. Upon changeover to the euro, the Lm equivalent will continue to be shown against euro amounts in all the above instances until the end of the dual display period (30 June 2008). The irrevocably fixed conversion rate of will invariably be used to derive the equivalent /Lm values. THE EURO, banking... and you 9

12 HOW AUTOMATED TELLER MACHINES (ATMs) WILL OPERATE IN EURO The banks have planned the deployment of their operational ATMs between 31 December 2007 and 1 January 2008 in such a manner as to ensure that every locality will be adequately served by an ATM of one bank or another, both on the eve of the euro changeover as well as immediately after the changeover. The interoperability which exists between the ATMs of various banks will minimise any inconvenience to customers to the extent possible during this period. ATMs will continue to dispense Lm banknotes until 31 December On that day, all ATMs will operate normally until 3 p.m., after which the phasing-out of certain ATMs will commence in order that these machines can be converted to start dispensing euro banknotes immediately after midnight. A sufficient number of ATMs to cater for anticipated demand will remain in operation until 10 p.m., but these machines will then also have to be switched off until midnight to allow the banks to carry out the necessary technical conversion of their ATM operating systems. Immediately after midnight, at least 60% of all ATMs will come into operation and will start dispensing euro banknotes. All other ATMs will be brought into operation on a phased basis in the course of -day, bringing the ratio of euro-dispensing ATMs to at least 85% by noon, and 100% by 4 p.m. Details of which ATMs will continue to dispense Lm after 3 p.m. on 31 December 2007, and which ATMs will start dispensing euro banknotes immediately after midnight, will be widely publicised in the run-up to -day. Existing ATM cards will continue to operate as usual after 31 December Your existing card and Personal Identification Number (PIN) will remain valid. ATM transactions in Lm carried out in the afternoon on 31 December 2007 may appear on your next bank statement as euro transactions (converted at the irrevocably fixed rate). All ATM transactions carried out as from 1 January 2008 will be processed in euro. Deposits of Lm banknotes through ATMs will still be possible from -day until 31 March Cheques issued in Lm prior to 1 January 2008 may also be deposited within the normally accepted validity periods, latest end June 2008 (see How cheque payments will be made in euro on page 7). Appropriate guidance for effecting such deposits will be given to customers by their respective banks. 10 THE EURO, banking... and you

13 HOW CARD TRANSACTIONS WILL BE HANDLED IN EURO. Existing debit and credit cards will continue to operate as normal after 31 December Your existing card and Personal Identification Number (PIN) will remain valid. Debit and credit card transactions will continue to be processed at the point of sale in Lm up to midnight on 31 December From 1 January 2008, all transactions processed at the point of sale will be in euro. More specific information regarding the automatic conversion of electronic point-of-sale (EPOS) terminals from Lm to euro will be provided to merchants by the banks concerned. Debit and credit card transactions carried out during the last few days of 2007 are likely to appear on your next bank statement as euro transactions (converted at the irrevocably fixed rate of ). However, this may vary between banks. All such transactions carried out as from 1 January 2008 will be processed in euro. THE EURO, banking... and you 11

14 FURTHER INFORMATION Should you wish to obtain more information on euro-related banking queries, it is suggested that you contact your local bank directly. Contact details of the local commercial banks are as follows: APS Bank Ltd APS House 20, St Anne Square Floriana Telephone: (+356) Website: Lombard Bank Malta p.l.c. Lombard House 67, Republic Street Valletta Telephone: (+356) (+356) Website: Bank of Valletta p.l.c. BOV Centre, Cannon Road Santa Venera Telephone: (+356) Website: Volksbank Malta Ltd 53, Dingli Street Sliema Telephone: (+356) (+356) HSBC Bank Malta p.l.c. 233, Republic Street Valletta Telephone: (+356) Website: Malta Bankers Association 48/2, Birkirkara Road Attard ATD 1210 Telephone: (+356) (+356) THE EURO, banking... and you