Rounding and smoothing guidelines published

The National Euro Changeover Committee yesterday published a set of guidelines on the rounding and smoothing of Maltese lira amounts converted into euro.

The aim of the guidelines is to ensure fairness where conversion of monetary amounts from the lira (Lm) into euro necessitates the applicability of rounding and smoothing.

The committee said that rounding rules in connection with conversions of national currencies into euro have already been established in EU law. Such rules are an integral part of the monetary law of the euro area which Malta shall form part of upon euro adoption.

Rounding is part of the process of converting a legacy currency unit into euro that expresses the converted number as a round number, say, 11.357 rounded off to two decimal places becomes 11.36. Smoothing is the process of changing an awkward number after euro conversion to a more acceptable or memorable one, like, for example, e10 instead of e10.02.

Committee chairman Joseph F.X. Zahra stressed that it is normal that during a changeover period there are requirements that will necessitate rounding or smoothing of euro amounts converted from the lira to convenient round figures such as in the case of €1, €10, or €4,000.

Mr Zahra stressed the importance that everyone observed these guidelines: "All governmental, business and non-profit making organisations are expected to follow these guidelines when applying rounding and smoothing during the conversion from the lira to the euro. These guidelines are specifically aimed at ensuring price stability and transparency and see that consumers are being safeguarded during the changeover process".

The guidelines on rounding highlight the fact that the irrevocably fixed conversion rate with six significant figures (say, €1 = Lm0.429300) shall be used when converting amounts from the lira to the euro. The irrevocably fixed conversion rate may not be rounded or truncated when making conversions. Therefore, calculations with 0.4, 0.43, 0.429, etc. will not allowed. The guidelines also lay down that only the irrevocably fixed conversion rate shall be used for calculations and inverse rates (for example, 2.32937) cannot be used as these might lead to inaccuracies in the conversion of the original amounts. Amounts converted to euro have to be rounded up or down to the nearest (euro) cent.

In all cases, the amount shall be rounded up if the application of the conversion rate gives a result which is exactly half-way (0.005 or 0.5 (euro) cent); so 0.005 would be rounded to 0.01.

On the process of smoothing, the committee said there is no official guidance at European level on smoothing of euro amounts and thresholds. However, to set an example and to reduce inflationary pressures that could be identified with the adoption of the euro, any smoothing of converted euro amounts by the government (including its agencies and the public sector) will be in favour of the consumer. The guidelines suggest that smoothing for presentational reasons should be avoided unless it is required to provide consumer convenience in pricing.

Mr Zahra concluded that the guidelines are extremely important because they provide the necessary protection and safeguards for consumers during and after the changeover process.

"We remain committed to ensure that consumers and vulnerable groups in society will be treated fairly by everyone and it is important that everyone realises that the principles of transparency and fairness will have to prevail during the changeover process. At the same time abuse will not be tolerated," he said.

The guidelines can be downloaded from the committee's website at www.euro.gov.mt and a hard copy can be obtained from its offices in Valletta.