UK banks may need to begin preparations for the introduction of the European single currency in advance of any referendum ordered by the British government, according to a new report published by banking trade groups.
The report, published by the British Bankers Association and the Association for Payment Clearing Services (Apacs), says that banks would require as much as three years advance warning to lay the groundwork for the introduction of euro notes and coins. The government has stipulated that euro cash should be circulating within two and a half years of any referendum, raising the prospect of banks starting work on the switch before the public votes on the issue.
Chris Pearson, chief executive of Apacs says: "The timetable proposed by HM Treasury would be extremely challenging for the banking industry and we believe that it is necessary to address some of the key preparatory issues now."
Describing entry to the single currency as "the most wide ranging and challenging task ever faced by the UK banking industry", the blueprint concludes that a period of 2 years would be required between a Government decision to proceed with UK entry and when the banks' retail systems could be made ready. A further period of between 10 and 14 months would be required before notes and coin could be introduced, states the document.
The BBA estimates the cost of the transition to the UK banking sector at approximately £1 billion. It fears that banks could lose millions if voters reject the euro.
Ian Mullen, chief executive of the BBA says: "A significant amount of preparatory work has now been done. However, no significant investment is being made by the banking industry in advance of a Government decision to proceed with UK entry."