Banking systems vendor Misys is warning that many retail and investment banks are not ready to meet the 1 January 2002 deadline for changeover to euro notes and coins.
The company, which supplies banking software to most of the world's top 50 banks, says many financial institutions have so far failed to grasp the urgency of preparing for the switch to the new unified currency.
Neil Jones, director of the Misys Management Consultancy Practice, says: "The euro continues to be the spectre haunting banks. Many banking systems are still not ready for the changeover date which will have significant implications for millions of corporate and individual bank accounts."
Under the euro changeover all references to 'legacy currencies' (Deutschmark, Lira etc.) must be replaced with ‘euro’, as will all legacy notes and coins in branches have to be replaced with Euro notes and coins. Similarly, legacy travellers cheques must be replaced with euro currency (recommended not to be sold after Sept 2001).
All accounts must be automatically converted to euros by 31 December 2001 and all loans must be re-denominated into the new currency by the December deadline. Nostro accounts (a bank’s account with another bank in the local currency) will also need to be re-denominated and consideration needs to be given to how many will be required post 1 January 2002.
The changeover will futher require all existing Standard Settlement Instructions (where and how banks want monies sent) to be analysed and changed where necessary. References to legacy currencies in Swift payments will have to be converted to euro as any payments denominated in legacy currencies will be rejected, which may result in interest claims, a drop in service levels and manual effort to repair.
On the consumer side, customers with standing orders and direct debits in legacy currencies will need to alter their accounts and customers with multi legacy currency accounts need to consider the extent of consolidation required.
Neil Jones warns: "Banks cannot afford to be complacent on this second phase of the changeover. Customer service could be badly affected if the right changes aren’t put in place."
Banks will have to replace, upgrade or amend existing systems in use, and process and procedural changes will be required, including settlement instructions, cashiering and Nostro accounts.
Letters will need to be sent to customers and staff explaining the changes and an high degree of staff training, especially in branches, will be required. According to Misys, a team will be needed to work over the year end period to ensure smooth transition and deal with queries and issues.
"This is not purely a systems issue – it is a business issue and all areas of a bank must be involved in the changeover preparations. Failure to implement the changes may result in increased costs caused by workarounds and manual interventions to fix errors, and possible financial loss," concludes Jones.