QuestionsQuestions (BSP CIRCULAR LETTER)
The purpose is guidance: it summarizes key features of the Euro as the common currency for EMU countries and directs reporting/operational adjustments by all concerned, including the BSP’s own reporting systems and other entities subject to BSP requirements.
Starting January 1, 1999, the Euro became a currency in its own right, and the European Central Bank became fully operational.
Eleven EMU founder countries’ legacy currencies were to be replaced. The listed currencies are: Austrian Schilling, Belgian Franc, Finnish Markka, French Franc, Deutsche Mark, Irish Punt, Italian Lira, Luxembourg Franc, Netherlands Guilders, Portuguese Escudo, and Spanish Peseta.
The Euro is subdivided into 100 cents and settled to two decimal places.
Conversion rates are fixed to six significant digits on December 31, 1998. These fixed rates remain unchanged for converting from January 1, 1999 up to June 30, 2002.
No. While the legacy-to-Euro conversion rates are fixed, the conversion rate of each currency to the Euro and the Euro to US dollars can change on a day-to-day basis.
Euro notes and coins came into circulation on January 1, 2002. Legacy currencies remained legal tender until replaced, and during the dual circulation period (January 1, 2002 to June 30, 2002), both could coexist (some countries may shorten the period).
No. Existing legacy currency accounts may be maintained alongside Euro accounts during Jan 1, 1999 to Dec 31, 2001, and conversion is not compulsory until Dec 31, 2001, when all accounts in the eleven currencies shall be closed and converted to Euro.
The conversion involves closing the legacy currency account and opening a Euro account at the fixed conversion rate set on Dec 31, 1998. Rates are not truncated/rounded during conversion. If the result is not an exact number of the smallest currency unit, it is rounded up/down to the nearest unit; if exactly halfway, it is rounded up.
Yes. Euro accounts can be maintained in any bank in any country in the European Union.
Balances in legacy currencies are expected to show balances both in Euro and the legacy currency during the transition period, whether or not a separate Euro account was opened.
The Euro is a currency in its own right. The ECU is a basket of currencies including eight legacy currencies (listed in the text) and three non-legacy currencies (Danish Markka, British Pound, and Greek Drachma). The Austrian Schilling and Finnish Markka legacy currencies are not included in the ECU basket.
It states the BSP’s Daily Foreign Exchange Bulletin will incorporate the fixed conversion rates of legacy currencies to the Euro and the corresponding daily foreign exchange rate to US dollars and pesos starting January 4, 1998. These rates are used to convert accounts denominated in legacy currencies to Euro and the corresponding US dollar and peso equivalents.
The Euro must be introduced into the BSP’s currency library as a new currency effective January 1, 1999, and the legacy currencies must be deleted from the said library on July 1, 2002.
Yes. Banks and non-bank financial institutions, government agencies, corporations, and private entities with existing foreign loans denominated in legacy currencies must notify the BSP of the loans converted.
Transactions and balances on foreign liabilities must continue to be reported in original currency on a per account and per transaction basis. The country of creditor must continue to be reported notwithstanding the consolidation of accounts into the Euro.
The public and private sectors—including individuals—with transactions and accounts in these currencies are expected to modify their accounting systems to reflect the developments.