EMU-
MAKING THE CHANGE
12
info exchange
WHAT'S NewS Issue 11 November 1996
The shift to a common European currency has been greeted with a
complex mixture of hope and apprehension.This is understandable:
after ail, it will touch on almost every aspect of life. Banks, in particular,
confront substantial transitional costs and, initially, pressures on their
profitability. But for progressive and outward looking players, the single
currency regime will bring considerable opportunities as well.
From left to rigbt: Evelyn Cueni, Thomas Mani, Fergus Murphy, Fïervé Petit, Jan Sybesma
Roel van Veggel, Björn Gross, Joachim Krinke, Barbara Schreeb-Ziegler, Flolger Dobra,
Bram Kruimel, Padraig McCreesh, Alexandra Nenninger, Inge Mulders, Roberto de Cardona,
Nigel McDonagh, Flan Segaar, Edwin van Raalte, Thierry Collet, Walter van Miegbem,
Flans FFonig, Alfredo Jiménez-Millas.
This was the underlying consensus as RI's
EMU/Euro coördinators gathered in
Frankfurt early this month to discuss the
specific challenges and opportunities
involved. 'We came away with a clear
sense that the transition towards EMU -
while difficult - also opens up new doors
for Rabobank as well,' says Bram
Kruimel, who is heading up Rabobank
International's Euro transition team. This
is one of the working parties of
Rabobank's Steering Committee which is
led by Jan Groninger of the Executive
Board and coordinated by Wim Boonstra
of the EMU coordination unit.
EXPLOITING OPPORTUNITIES
'Until now, everyone has been talking
about the heavy cost of new systems and
the loss of income from treasury
operations - especially guilder FX, bonds
and derivatives where we are strong,' says
Kruimel. 'But we mustn't forget that we
will also be playing in a much bigger
game. We have to change our mind-set
from one focused on problems to one
seeking opportunities.' As Kruimel points
out, even the biggest players on the
European banking scene will be small in
comparison with a radically expanded
market. The bank that can correctly
identify its strgngths and weaknesses,
sector by sector, can better exploit
strategie niches.
CHANGING BASE
Initially, the problems will be considerable
and the technical groundwork for a new
commercial strategy is being carefully laid.
In addition to declining margins and the
loss of income from treasury operations,
the bank must come to grips with specific
challenges on at least three fronts. These
include:
technical issues related to the adaptation
of internal IT and payment systems;
legal uncertainties, and;
competitive questions arising from
monetary policy harmonization.
'If the common currency agenda moves
forward according to plan, then between
the years 1999-2000, we're clearly going
to have to change our base currency over
to the euro,' Kruimel says. 'One of the
biggest issues, in terms of personnel
requirements, will involve adjusting our
information-handling systems to
accommodate this change.'
ADJUSTING SYSTEMS
Every system - from the large ones used in
the dealing rooms to the smallest
individual spreadsheet - will have to be
adjusted from guilder to euro. Conversion
will at first be focused on systems dealing
with internal administration, financial
market transactions and international
payments, followed by those handling
retail payments. Progress will be
determined as much by the availability of
qualified personnel as by technical
challenges per se. 'As a challenge, this
comes on top of the already complex 'Year
2000' problem, which involves upgrading
computer clocks,' says Kruimel. Now, the
major systems like Atlas and Devon should
be fairly easy to render 'euro-proof'.
But there are a whole host of subsystems
and interfaces that will have to be
addressed.'
DIFFERENT SPEEDS
What's more Kruimel notes, the agenda
for new systems roll-outs in the various
branches is taking account of EMU-
related considerations. At the heart of
these choices lies an imponderable
question: how quickly will customers
adapt to the new regime? While the
capital markets are likely to make a
relatively rapid changeover, the new
currency may be slower to take hold
among retail customers, and wholesale
clients are likely to use both for a time.
'The starting point of our work has been
the assumption that the international
network should be fully prepared for the
transition to EMU by 1999 - not just
technically but commercially as well,'
Kruimel says.
OPEN QUESTIONS
In addition, the guilder-euro switch raises
legal uncertainties. Will the shift to Euros
trigger clauses that make it possible to
renegotiate other aspects of existing
contracts? Finally, there are monetary
policy conversion issues. For example, will
the bank be paid interest on the reserves if
and when it is required to deposit with the
