Bulgaria’s Ombudsman reports alleged irregularities by banks in exchanging leva for euro

Ombudsman Velislava Delcheva has notified the head of the Association of Banks in Bulgaria, Petya Dimitrova, of reports from the public about problems with the exchange of banknotes and coins from leva to euro in commercial banks, according to a statement on the Ombudsman’s website on January 7.

Among the irregularities mentioned are the charging of fees, the requirement for declarations of origin of funds even for amounts under 1000 leva, restrictions on exchanging amounts, fees for counting coins, a lack of euro banknotes, and a unilateral change in ATM withdrawal limits, from 400 leva to 100 eurom the statement said.

“During the first six months from the [January 1] date of the introduction of the euro in the Republic of Bulgaria, credit institutions exchange free of charge, in an unlimited amount, banknotes and coins from levs into euros at the official exchange rate, and for amounts over 30 000 leva per transaction, credit institutions exchange banknotes and coins from leva into euro free of charge after a prior request of three working days,” Delcheva said.

Delcheva issued a reminder that the law allows the introduction of fees for the exchange service only after the expiration of this six-month period, and any additional conditions or restrictions introduced outside the legal framework are unlawful and inadmissible.

She also drew attention attention to the Anti-Money Laundering Measures Act, the requirements of which should be applied only in the cases explicitly provided for by law.

In order to protect the rights and legitimate interests of citizens in the process of transition from the lev to euro, the Ombudsman is insisting that the Association of Banks in Bulgaria undertake urgent inspections and actions, analyze the problems that have arisen, and express a clear position on compliance with the Euro Adoption Act by all banks that are members of the association, the statement said.

On January 7, the Active Consumers association’s Bogomil Nikolov and economist Roumen Galabinov told Nova Televizia that the first week of the introduction of the euro in Bulgaria has passed relatively calmly, without mass upheavals or serious systemic problems.

They said that even though they were individual reports and complaints, the process of currency transition was proceeding in a controlled manner.

Nikolov said that it could not be that there were no reports and irregularities “bur they are rather isolated than systemic”.

He said that the most serious problem at the moment was not related to the retail network, but to the banking sector and the administrative procedures for exchanging leva for euro.

According to Nikolov, the absence of banks and the Bulgarian National Bank from the National Coordination Centre for the adoption of the euro is a serious concern.

“Neither the Bulgarian National Bank nor the Association of Banks is participating, and at the same time we see the most signals against banks – about fees, limits and the requirement of declarations,” he said.

Nikolov said that one of the main problems was the requirement for additional documents when exchanging small amounts.

“If you go to exchange 100-200 leva, they give you a folder with declarations, which is absolutely unnecessary.

“This is an attempt to collect information from a person who is not a client of the bank and will not be one,” he said.

He said that such practices have no legal basis and discourage people from using bank branches.

Galabinov predicted that within the first few weeks, over 40 per cent of the leva in circulation will be withdrawn to the BNB through commercial banks.

“By the end of the month, I expect about 90 per cent of the leva money supply to have already been withdrawn from circulation and replaced with euro,” he said.

Regarding the requirements for the origin of funds, Galabinov reminded that the legal threshold is significantly higher.

“Under the Anti-Money Laundering Measures Act, declarations are required for amounts over 30 000 leva, that is, about 15 000 euro. However, currently documents are requested even for the smallest amounts, which needs to be corrected,” Galabinov said.

On the setting of limits for currency exchange in bank branches, they said that regulation and instructions from the BNB are needed.

“That is why it was important for the central bank to participate in the Coordination Centre and provide interpretations as a regulator,” Galabinov said.

Regarding the prices of goods and services, Nikolov said that the main risk of speculation is observed precisely in the service sector.

“There are alerts about parking lots, hair salons and repair shops. For example, a service that cost three leva is now offered for two euro – this is about a 25 per cent increase,” he said.

Galabinov emphasised that the situation with basic goods remains stable.

“We have no change in fuel prices, as well as in large retail chains. There the prices are almost entirely the same, simply converted into euros,” he said.

Nikolov also drew attention to the role of consumers in market control.

“People prefer to write on social networks or report to the media instead of filing official complaints with the Consumer Protection Commission. And without active consumers, there is no way for institutions to react effectively,” he said.

Regarding the transitional period, the two were categorical that it should not be extended.

“Dual circulation should not last more than a month. It is difficult and expensive for business, and it is not in the interests of consumers,” Galabinov said.

He said that the experience of other countries shows that within two weeks most of the old currency disappears from circulation.

Deputy Minister of Finance Metodi Metodiev, speaking to bTV on January 6, said: “Bulgaria’s transition to the euro is taking place smoothly and calmly, as all institutions had foreseen.”

Metodiev said the first days of Bulgaria’s membership of the euro zone have passed without significant difficulties for both the public and businesses and institutions.

The problems reported so far were sporadic and of an operational nature, mainly related to the availability of small denominations, the return of change in euro or cases of inaccurate double price marking.

“These are issues to which the institutions respond quickly and effectively,” Metodiev said.

Bulgarian National Radio reported on January 7 that police were stepping up security at post offices and banks starting today, because of the payment of the first pensions in euro.

Teams from the Gendarmerie and the regional directorates in the country will be deployed in small and remote settlements, according to the Interior Ministry.

Police will be positioned mainly around post office and bank buildings and will provide assistance and assistance to the public if necessary.

The Interior Ministry’s main appeal to the public is to exchange their money only at banks, post offices and licensed financial institutions.

(Photo: Bulgarian National Bank)