The euro-readiness of the banks’ customers


Colin Stringer*
If you are like me you will have read more than enough doom and gloom messages, aimed specifically at the world’s banking community, warning you of the perils of not being ready on time for the advent of Economic and Monetary Union (EMU). I am sure you have listened to these messages and set in train a co-ordinated cross-functional programme aimed at preparing your bank not only for the challenge presented by EMU but also for the opportunities it will bring to those who are ready.

If not, by the time this article appears, you have probably left it too late !

So fine, you will be ready on time and in a position to offer a first class service in euro-denominated instruments - second to none. What, however, of the preparations of your customers ? Are they going to be ready and what will it mean for you, their banker, if they are not ?

Many moons ago, on my first training course at NatWest, I was taught the CAMPARI guidelines, an acronym for remembering the canons of good lending. Many banks, over the course of the past few years, have added an extra criterion, namely Year 2000 compliance, to the check-list as they have acknowledged that systems failure in this connection could jeopardise, very quickly, the ability of the customer to service their loan.

Clearly, if a company experiences problems with the Year 2000 issue, it will notice these very soon into the new year and the effects will become noticeable, both internally and externally, all too quickly. Failure to be prepared for the advent of EMU will probably be much more subtle but, potentially, just as damaging.

It may begin with customers becoming confused over pricing of goods. This can be in several ways. The advent of the euro will mean that price differentials across Europe are suddenly much more apparent and clients who are in a position to do will begin to shop around and may even play off one operating unit against another unit of the same supplier.

Another way that customer loyalty will be challenged is if companies are not clear in the pricing of their goods. At the time of writing it seems that Austria is the only country that will legislate on this issue. As a result, in many countries companies will follow their own instincts and will have to ensure that they do not irritate their customers to the point of losing their custom.

The tenet of ‘no compulsion, no prohibition’ means that each company must decide on its own euro-positioning, a factor which makes talk of EMU-compliance or euro-compliance a nonsense as compliance is a very subjective matter. Companies who invoice in, say, FRF, will have to be able to handle the requirements of customers who wish to settle in EUR and failure to be prepared for this eventuality could lead to loss of business.

Training and communication will play a critical role in this preparation as it is essential that each company offers a consistent message to its markets. Already companies, in all sectors of industry, are finding that training is going to represent one of the major cost items in EMU preparations.

So how are companies across Europe shaping up to meet this challenge and to benefit from these opportunities ?

In general, in those countries that anticipate participation in the first wave, the degree of preparation can best be described as ‘patchy’. The press has reported, again and again, the stance being taken by certain major players but many other companies, both large multi-nationals and SMEs (Small and Medium-Sized Enterprises) are being remarkably dilatory in their preparations and will, in due course, feel the effects of this lack of preparedness. As one would expect this is particularly marked in those countries (such as Spain, Portugal and Italy) which, only over the last year or so, have begun to see early entry as an obtainable goal. However, worryingly, there are instances of an ostrich-like attitude even in some of the ‘core’ EMU countries.

Now that the position of the UK has been made clearer, with Gordon Brown announcing:-


"On Europe, the time of indecision is over.
The period for practical preparation has begun."


one might have expected a sudden flurry of activity, across all sectors. The reality is that, whilst there has been a heightening of interest in EMU-related services, the only sector that seems to have been galvanised into action by the Chancellor’s speech is the insurance industry, possibly because they appreciate that it is dangerous to let Parkinson’s Law come into effect and for the task to expand to fill the time available.

What have banks done to address this situation ?

Many banks, across Europe, have been running seminars, specifically aimed at their corporate clientele, advising them of the basics of EMU and of the bank’s response. The aim of these sessions has been twofold: to keep their clients abreast of the latest thinking on EMU and, at the same time, to ensure that they position themselves as the bank of choice for the provision of euro-related instruments.

Thus some banks, but by no means all, have been taking proactive steps to ensure that their clients are aware of the pitfalls and of the danger of lack of appropriate preparations. It would be naïve to believe that the aim of these seminars and workshops is purely altruistic. The banks that have organised such events are those that have appreciated what it might mean for themselves if their clients are embarrassed by the advent of EMU.

Even those banks who have gone out of their way to educate their customers do not seem to be adequate investing time and effort in quantifying the preparedness of their clients. If I think back to those CAMPARI guidelines it was always a requirement that tangible evidence be identified for each criterion. Banks would be wise to adopt this same stance with EMU preparedness. But how does one quantify something that is, essentially, subjective to each and every company ?

I would suggest that banks should, as a matter of routine, discuss their EMU preparations with each and every corporate customer, particularly, in the UK, concentrating on those that buy from, or sell to, countries that are likely to participate in the first wave. The following topics could form the backbone of such discussions:-

Clearly there are other questions that banks would wish to add to their check-lists for clients, particularly with reference to the bottom-line effect of the transition costs. For clients who are based in ‘in’ countries or who deal with ‘in’ countries this should be effected without delay. For those in countries, such as the UK, who anticipate participation in a subsequent wave, this should be carried out systematically over the next year.

All companies need to carry out a thorough review of how they do their business and to identify where EMU will have an impact upon the systems and processes that they use to perform that business. The leaders in EMU preparations have all admitted that they have been surprised at the level to which the potential effects of EMU permeate throughout their organisation. Only by carrying out such a review can each company be assured that it has ‘turned over every stone’. This is not just ‘another IT problem’ or ‘something for the accountants to look at’ but must be viewed as a multi-disciplinary programme with representatives from a multitude of disciplines.

By way of conclusion it is worth commenting that some financial institutions themselves have left their own preparations for EMU remarkably late. Even now my own firm is receiving Requests for Proposal from investment banks. This must be viewed as very late in the day to begin addressing the challenge ahead, given the fact that there are now only months left.

For banks, however, getting their own house in order is not enough. They have an additional responsibility to ensure that their customers are adequately prepared or they may find themselves with endangered credit lines.


* ACIB, Associate Director of euroTRANSFORMATION™ Services at Cap Gemini UK -