InformationWeek
Defining The Business Value Of Technology
December 21/28, 1998
Braced For The EuroFinancial firms prepare for currency change taking effect Jan. 1
By Bob Violino
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he impending arrival of the euro, the standard currency that will be adopted by 11 European
countries, has multinational banks and financial institutions bracing for a busy end to 1998.Financial companies that do business in Europe have been installing new software and updating systems for months to accommodate the euro, which will be used for a variety of noncash transactions beginning Jan. 1. Analysts say much is at stake.
When they open on Jan. 4, European financial exchanges will begin trading in euros. "Huge amounts of data will be converted," says Nick Jones, VP and research director in the London office of Gartner Group Inc. "If this doesn't work, major banks may not be able to trade."
Because of the magnitude of the changes-which include expanding data fields for an additional currency, and converting existing currencies into euros and vice versa-there's a real possibility for problems, says Martha Bennett, VP of research in Europe for Giga Information Group. "This is the biggest data conversion event ever," Bennett says.
Chase Manhattan Corp., which has spent about $75 million in preparation, has held three tests over the past three months. "We wanted to prove that the conversion processes would work satisfactorily, and they did," says Nigel Knight, product and project manager for the euro at Chase Treasury Solutions, which provides cash-management and payment and liquidity management services to other firms.
Chase plans to convert all its internal financial systems in Europe to the euro over the New Year's weekend. "It will make life much easier for us if we treat everything as euros rather than as national currencies," Knight says.
Other banks are also preparing. "This is a very large and complicated process. It requires a lot of software changes and testing, which we've been doing for the past several months," says James McDonald, senior VP and CIO at State Street Bank & Trust in Boston.
By no means will euro conversion work be complete after the New Year's weekend. Both financial services companies and others expect to make systems changes throughout a lengthy transition period. Under the schedule set by the European Union, the euro will co-exist with the older currencies through Dec. 31, 2001. Euro coins and bank notes will go into circulation on Jan. 1, 2002, and six months later the euro will replace the older currencies and become the only valid currency.
With additional reporting by Bruce Caldwell
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