News Release
Practical Issues Arising from the Introduction of the Euro
17 September 1998
The ninth edition of the Bank’s practical euro guides is being published today.
John Townend, who is in charge of the Bank’s work in helping the City of London to prepare for the euro, said today: “The aim of the latest Practical Issues is to provide definitive guidance to those preparing for the euro, not just in London but everywhere. For the first time we have brought together, in an easily accessible form, all you need to know to deal and settle transactions in the euro markets from the start of next year. It is essential that wholesale market firms study the detailed information on the changeover in prospect, and communicate it to their traders and back-office staff.
Market firms that do this effectively will put themselves at a competitive advantage; those that do not are putting their competitive position at risk. Today’s edition should also help firms because it goes beyond technical issues to discuss the strategic changes in the marketplace which the euro is expected to bring, and against which market firms need to plan.”
The Bank has been helping the City to prepare for the euro for the past three years. As part of its effort, the Bank has been producing a broadly quarterly series of Practical Issues since early 1996. This is the ninth edition. Over 40,000 copies are now distributed across the City and beyond, including more than 5,000 which go directly overseas. They are also available on the Internet. The Bank intends to produce another edition in December.
Content of the September 1998 edition
The market guidance for both traders and back-office staff in this new edition covers:
- The conventions for new euro money and foreign exchange transactions and associated derivatives; the treatment of outstanding transactions in national currencies (like DM and FF); foreign exchange quotations, especially Euro:£ and Euro:$, and price sources (like euro LIBOR); (pages 9-12).
- The conventions for new euro issues of government bonds; the redenomination of existing government issues in national currency, and reconventioning; the treatment of corporate bonds, bond futures and options; (pages 12-17).
- The changeover to the euro in share trading, share indices, and the treatment of historic price data (pages 17-19).
For back-office staff in particular guidance is provided on:
- The routing of euro payments, standard settlement instructions and nostro accounts, given the large number of competing euro payment systems which will be available. New euro standard settlement instructions should be notified by 30 September at the latest (pages 20-25).
- The conversion weekend itself, including the timetable over the conversion weekend, the steps that back-office staff need to take, and the role that the authorities could play (pages 25-37).
- Changes to standard legal agreements in the London market, and on bank syndicated loan documentation (pages 37-39).
The September edition also includes an update on the following:
- the operational framework for monetary policy in the euro area;
- the decisions by the ECB on TARGET pricing and on ‘out’ countries’ access to intraday liquidity;
- the results of meetings with a sample of major financial institutions in London to confirm that they are on schedule in preparing for the euro, and to identify technical issues that still need to be addressed;
- business, retail and public sector preparations; and
- an update on legal, accounting, tax and regulatory issues.
Beyond these technical issues, the September Practical Issues also previews the euro products and services that major market firms will be providing in wholesale financial markets in London, from the beginning of next year, in order to meet the changes in the marketplace that the euro will bring (pages 83-96). This preview covers the money and foreign exchange markets and banking, the bond and equity markets and fund management. 26 major market firms in London from the UK, the USA, continental Europe and Japan have contributed to this exercise.
