The accession of Bulgaria to the Eurozone will have a positive impact on the Bulgarian economy and will be an engine for accelerating reforms, it became clear during the business conference “Together towards success: A stable financial ecosystem and Bulgaria’s path to the Eurozone”, organized by the Association of Banks in Bulgaria.
The event was attended by Petia Dimitrova, Chairperson of the Executive Board of ABB, Tsvetanka Mintcheva, Deputy Chairperson of the Executive Board of ABB and Tamas Hak-Kovacs, member of the Executive Board of ABB. Petar Chobanov, Deputy Governor in charge of the Banking Department and Member of the Governing Council of the Bulgarian National Bank (BNB), and Metodi Metodiev, Deputy Minister of Finance, also addressed the participants.
During the forum, the participants united around the idea that Bulgaria’s admission to the Eurozone will have a positive impact on the well-being and the reaching of the European standards of living.
“The accession of Bulgaria to the Eurozone and to the second most used currency in the world is a long-awaited process. It will have a positive impact on the economy of our country and will be an engine for accelerating reforms and increasing well-being”, commented Petia Dimitrova, Chairperson of the Executive Board of ABB and added: “The benefits for citizens and companies will not only be from the point of view of reducing of transaction costs, but also by improving the investment environment, activation of local and foreign investments, with increased investment activity, which is expected to support employment”.
She added that this will certainly have a positive impact on lending, and will open up many additional opportunities, including for the development of the capital markets in Bulgaria:
“I’ll give a specific example – currently banks hold 12% of deposits in the form of minimum required reserves in the BNB, which is over BGN 16 billion. In the Eurozone, minimum reserves are 1% and the ECB pays 4% interest on excess reserves. The difference is a hidden additional annual tax of over BGN 600 million, which goes to the state through the BNB”, explained the Chairperson of the Executive Board of ABB.
“The banking sector lends reasonably and responsibly. It is clearly visible that the growth of consumer and mortgage loans is comparable to the growth of incomes, as well as to the growth of GDP. If we look at the data on the size of the average salary, we will see that over the last 10 years it has increased 2.7 times, and the minimum wage increased 3 times, which is more than the growth of consumer and mortgage loans – higher household incomes are enough for servicing most of the loans that they have taken”, Petia Dimitrova also highlighted. According to her, there are no grounds for expectations that interest rates can rise with the introduction of the new currency.
Petia Dimitrova emphasized that the preparation, in addition to being time-consuming, is also very expensive – the total amount that banks are expected to spend for the introduction of the euro – for the exchange of money in circulation, as well as for the necessary changes in their information systems and awareness campaigns, will amount to between BGN 300 and 400 million. Petia Dimitrova explained that together with the members of the Association of Banks in Bulgaria they plan to conduct an information and awareness campaign among citizens, for which they also rely on cooperation from the institutions to explain all the benefits of adopting the euro, which will significantly improve the business environment.
“The Association of Banks in Bulgaria and the BNB have a common vision for the campaign for the adoption of the euro – we believe that effective communication and preparation around the technical requirements are key to a smooth transition when introducing the euro”, commented Petar Chobanov, Deputy Governor in charge of the Banking Department and Member of the Governing Council of the Bulgarian National Bank and added: “If there is a system in the Bulgarian economy that is already in the Eurozone, from the point of view of requirements, regulations, good business practices and behaviour, it is the banking system. It is a model for stability and growth.”
“Entering the Eurozone will not lead to specific changes in lending, but banks must finalize projects and investments in 3 main areas: double visualization of the systems, which will give customers a buffer period of time in which they will be able to pay in both currencies; service of government payments to ensure that there will be no delay in transfers and exchange of money in circulation”, commented Tsvetanka Mintcheva, Deputy Chairperson of the Executive Board of ABB. She encouraged customers to choose to deposit their money in banks, as the funds in the accounts will be automatically converted.
Tsvetanka Mintcheva added that banks are a key partner of citizens, businesses and the state in the process, and therefore they have a responsibility to be prepared even before having a political decision on Bulgaria’s accession to the Eurozone.
“During the process, the banks will invest additional funds in the excellent training of their employees, as well as in the good customer awareness of the benefits of adopting the euro”, commented Tamas Hak-Kovacs, a member of the Executive Board of ABB
Tamas Hak-Kovacs also presented the main priorities in the work of the Association of Banks in Bulgaria, including sharing knowledge and expertise, developing technologies and innovations, improving customer satisfaction and creating high-value banking services, with focus on sustainable development, ESG and regulatory changes.
“The main focus of the Association of Banks in Bulgaria is to support the prosperity of the Bulgarian society and economy by working in partnership with the media and institutions. As an Association, we want to put together our knowledge and resources and stimulate innovation in the field of finance and payments”, added Tamas Hak-Kovacs.
In his speech, Tamas Hak-Kovacs also emphasized three important facts about the Bulgarian banking system, which are a reason for pride – it has the highest capital position in the EU, provides the most affordable mortgage loans in Europe, so that people can improve their quality of life, and also provides the highest level of access to banking services through the large number of bank branches and ATMs, because this is the expectation of the market.
Metodi Metodiev, Deputy Minister of Finance, also took part in the conference. He emphasized the readiness of the Ministry of Finance to work in cooperation with ABB and BNB on the way to the Eurozone.
He confirmed that since 2018 there has been a political consensus for Bulgaria’s accession to the Eurozone and we are moving at an accelerated pace in this direction.
“There are three key aspects before us – to work in the direction of covering the price stability criterion, the technological preparation and the final layout of the Law on the adoption of the euro”, explained Metodi Metodiev.
