Alexander Dimitrov, TBI Bank: over BGN 400 million investments from banks guarantee continuity and convenience for Bulgarians from the first day of the euro

Mr. Dimitrov, the topic of Bulgaria’s entry into the euro area is among the most discussed in society. From your position as a banking expert, with a long career and in the BNB, how important it is for the banking sector?

The topic is important to our entire society, but it is of particular importance to the banking sector. The public significance of financial institutions makes them an important factor on which the smooth course of the process depends. The funds invested by the Bulgarian banks are estimated at over BGN 400 million. The main part of these costs is related to guaranteeing security, peace, comfort and protection of the interests of citizens. People in Bulgaria are accustomed to receiving 24-hour access to their funds in bank accounts, benefits from the amenities of immediate payments, paying and withdrawing money from ATMs and all other facilitations of modern banking. And we work to ensure all this to be preserved without interruption, from the first day of functioning of the new currency.

Is it ready TBI Bank for this change And what is ahead for the bank after the official announcement of the date of entry into the euro area?

Prices and inflation

There are fears in society that the acceptance of the euro will lead to a sharp rise in the price of goods and services. What measures will guarantee that traders and companies will not use the case speculation with transition prices?

The transition to the new currency itself does not lead to inflation pressure – prices increases in other countries have been the result of additional factors, not the act of adoption of the euro itself. The legislation requires double prices to be implemented, which should be applied no later than a month after the entry into force of the euro admission decision (expected on 08.07.2025). This will guarantee transparency and allow users and control bodies to monitor possible unfair practices. Even if some traders raise prices, the effect on overall inflation would be insignificant. In addition, after the two -digit inflation experienced in our country three years ago, the possibility of comparing prices with other Schengen countries has no reason to worry about speculation and uncontrolled price increases.

We know that TBI Bank has traditionally offered amenities and automated solutions to support the activity of its trading partners. What do you do for them about preparing for the introduction of the euro?

Through the Fusion Pay platform, our trading partners have the opportunity to offer their customers flexible funding to increase their sales. As another step to facilitate their work, contributions for any installment financing and other financial parameters are indicated simultaneously in levs and euros, which supports faster adaptation, providing transparency and increasing customers’ confidence. During the months to the end of the year, and after the introduction of the euro, we will continue to explain and support the process.

Personal savings and loans

What will happen to our personal savings in BGN? Is there anything that people should do now – for example, to override their available lev savings before the date of introduction of the euro?

The funds on all bills in the banks will be automatically and freely overwhelmed without the need for further actions by their holders (without course differences, fees and any other hidden conditions). This is the easiest way to exchange. It is not necessary to take other actions in advance other than the funds to be deposited with bank accounts.

And what about levs? For example, if someone has a fixed interest rate loan in BGN, how will it be converted?

Levs loans will retain their terms without change. For those with a fixed interest rate, it will remain the same. For the floating interest rate loans formed by the basic interest rate disclosed by the BNB or other variable component (interest rate) plus allowance, the final interest rate will not exceed the sum of the two before the euro is admitted. In other words, if the client has paid a floating interest rate of 5%, for example, then this total number will be maintained and will be just as much as the euro is accepted. Any subsequent change will be due to a change in the variable component (interest rate), which analogous to the one used so far, will be clearly defined.

An advantage or disadvantage

Bulgaria has long been in a currency board and the lion is fixed to the euro. To what extent is the acceptance of the euro is only a symbolic change or will there be real practical effects/benefits?

The currency board was introduced in Bulgaria in 1997 as a temporary tool for dealing with hyperinflation and financial crisis. It provided stability and control over state finances, but also has a limiting effect on the economy. The BNB is deprived of an important function such as a monetary policy. The basic interest rate, which it only announces, does not determine, is formed on the basis of the concluded interbank transactions with deposits without being able to influence the market. And when we talk about inflation management, we must realize that our Central Bank in this Law has much smaller powers and means of influence. In the conditions of the currency board, the BNB is obliged to maintain its currency reserves in liquid foreign assets to ensure the stability of the lev. These are mainly government securities of euro area countries, ie. A significant part of the national financial resources is located outside the country and is not used to stimulate the national economy. After joining the euro area, the BNB will be able to manage some of the ECB reserves.

The role of European institutions

With its accession to the euro area, Bulgaria automatically participates in the management of the European Central Bank (ECB) through the BNB manager. What influence will we have there?

As early as 2020, the BNB joined the Single Supervisory Mechanism and was part of the General ECB Banking Supervision System, including by harmonizing the legislation. With this right to participate in the management of the ECB Bulgaria will gain direct access to decision -making, maintaining the stability of the euro and implementing measures to control inflation. Bulgaria will also gain access to stabilization mechanisms, which increases confidence in the economy.

All these positive signs are expected to lead to an improvement in our country’s credit rating, which will reduce the costs of financing and the weight of interest rates on the newly erected external debt on the state budget.

What about the BNB currency reserves in the context of the upcoming euro area accession?

With Bulgaria’s accession to the euro area, the currency risk will be eliminated, as well as the related BNB obligation to maintain the stability of the national currency. This will extend the opportunities to manage currency reserves by allowing more flexibility in investment. At the same time, the high level of security will be maintained through the requirement that investments be only in high credit rating tools.

All financial and other assets in the BNB balance sheet, beyond the common monetary assets of the Eurosystem, will remain the property of the central bank, and its independence will be preserved and the government will not be able to dispose of them.

At the same time, the euro – the second most important reserve currency in the world after the dollar – will be supported by the ECB and 20 other central central banks united by the common goal of maintaining pricing stability through a medium -term inflation of 2%.

Of course, joining the euro area does not completely eliminate the risk of future crises, but access to more significant resources and more efficient management tools will increase our sustainability.