Four areas may be of particular interest.
First, we have taken the opportunity to stand back and review – in the first highlighted section – the most significant developments in the euro markets over the period since its launch, now almost two years ago. Deep and liquid euro markets have become well established, replacing the previous – more segmented – national markets, and thereby beginning to achieve one of the objectives of the single currency.
Second, the City of London has been making a positive and constructive contribution to the development of the euro markets. The available evidence indicates that London has fully maintained its position. This confirms our assessments in previous Practical Issues. The major international market firms continue to believe that London’s role as an international financial centre does not primarily depend on whether the UK is inside or outside EMU, but that it must continue to provide an attractive environment for financial businesses, and be up with international ‘best practice’.
Third, we explain in Chapter 3 the approach being taken by countries in the euro area to the completion of their changeover to the euro. The UK has a great deal to learn from the first wave for its own prospective changeover, in the event of UK entry. In addition, some of the issues which first-wave countries face will affect financial institutions in the UK.
Fourth, as part of the Government’s ‘prepare and decide’ policy, the Bank is publishing for the first time in Chapter 4 a detailed technical guide to the way a changeover to euro in sterling financial markets might work, if the UK were to join. It has been developed with the aid of market practitioners through the City Euro Group, which the Bank chairs.