Changing a currency cannot but cause concern regarding the manner in which bank accounts and other financial investments will be converted to euro. At present, conversion of Maltese lira monetary amounts to euro, be it cash, bank account balances, bonds or shares, mortgages and credit facilities, etc., incurs both an exchange and a bank administrative charge, over and above the Central Parity Rate (CPR) of e1= Lm0.429300. Consumers or business clients are, therefore, expected to cover the bank charges, which have a direct consequence on the value of the monetary amount. At present, opening foreign currency accounts or depositing in euro accounts also incurs bank charges.

This scenario changes completely on e-day, as all financial investment balances denominated in Maltese lira, will be automatically converted to euro at the Irrevocably Fixed Conversion Rate without any exchange or administrative charges. The Irrevocably Fixed Conversion Rate will be established once Malta receives the green light from the European Council for entry into the eurozone following a proposal made by the European Commission and having regard to the opinion of the European Central Bank. The conversion of Lm amounts into euro, therefore, will be done at no extra cost such as bank charges or any other exchange charges by virtue of Council Regulation 2866/98 which is directly applicable to all member states and which will be amended to include the conversion rate between the euro and the Maltese Lira. Therefore, current, savings, fixed, loan and other accounts with credit institutions, including debit and credit card accounts denominated in Maltese lira, will be converted automatically. The commercial banks have undertaken that the first bank account statement after e-day will provide details of the conversion of Maltese lira balances to euro.

With regard to home loans, where both the bank and the customer enter into an agreement, this agreement will not be affected by the changeover to the euro. Both the amount of the loan and the monthly installments should not change, for the simple reason that a new currency has come into force. This premise is governed by the principle of continuity of contracts (EC Regulation 1103/97 Art.3 and 4).

Euro adoption, however, requires the convergence of interest rates with those in the euro area. The central intervention rate of the Maltese lira is currently pitched slightly above the euro interest rate. Once Malta adopts the single currency, however, the euro interest rate will be the applicable base rate on which credit facility interest rates are to be built, unless interest rates specified in credit arrangements have been agreed to on a fixed basis and not as a top-up on the base rate as established by the Central Bank of Malta.

Payments effected using personal cheques can only be in Maltese lira until 31 December 2007. Cheques dated as from e-day onwards may only be denominated in euro. Cheques issued in Maltese lira as from e-day will not be accepted, but cheques issued in Maltese lira until 31 December 2007 can be deposited or exchanged for the normal validity period of six months from the date of issue, unless a different validity date is stipulated.

Cheques in euro from a Maltese lira denominated account and presented before e-day will not be accepted. If the same cheques are presented after e-day, their full value will be accepted, as current accounts will have been converted automatically. Euro denominated cheques on Maltese lira cheques (that is with the Lm sign crossed off) will also be dishonoured after e-day. Any remaining Lm cheque books will lose their validity after e-day and may no longer be used. New euro denominated cheque books will be issued by the relevant credit institutions in time for e-day.

Cheques drawn in euro on Maltese credit institutions should normally only be used to effect payments in Malta. If they are used elsewhere, they will take longer to process and may attract clearing and other administration charges.

Further details may be obtained by sending an email to [email protected] or calling Linja Ewro 154, where information officers are readily available for any assistance requested. The NECC website www.euro.gov.mt also contains valuable information and documents that you are free to download.

Daniela Xuereb is information

officer, National Euro

Changeover Committee