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To: John Mansfield who wrote (16661)	8/26/1998 4:34:00 PM
From: goldsnow	Respond to of 116764

Central Bank urged to beware of potential euro chaos 06:13 a.m. Aug 26, 1998 Eastern By Henry Engler LONDON, Aug 26 (Reuters) - European central bankers display an unsettling lack of awareness of the risk of disruptive payments problems when a single currency is launched at the start of next year, bankers say. ''Many banks have taken a minimalist approach toward preparing for the euro and I don't think the ECB (European Central Bank) is fully aware of what could go wrong on day one and day two,'' said one banker at a large international bank. Having left the implementation of the euro largely in the hands of the private sector, the ECB in Frankfurt and central bankers among the 11 nations joining the euro are in the dark over how banks are gearing up for January 1, 1999, the bankers say. ''The execution of the ECB's dream is in the hands of the practitioners,'' said one banker who heads his bank's euro programme. ''The Bank of England has been very good but others don't have a good idea of the state of preparations.'' London bankers say official silence on the issue is for a variety of reasons, not least the desire not to cause panic. But most say the dearth of public discussion results from a lack of communication between central bankers and the banking community. The simple fact, say bankers, is that there has been little initiative on the part of the national central banks to visit commerical banks to see how they are doing. And even when such visits occur there is a natural tendency among bankers to say preparations are proceeding smoothly even if they are not. ''The fact is that there is no incentive for a bank to be up front to the world or the regulator and say, 'I'm not actually going to be able to service my client's needs on day one.''' added another banker. While some of the largest international banks are seen as well advanced, others are considered far behind and some have not even completed a necessary review of what has to be done. Unless turned around, this lack of readiness could lead to sizeable disruptions in trading and the settlement of payments during the first few days of the euro's arrival. The critical days in question run from December 31 to January 4, the first full day of trading in the new single currency. The so-called conversion weekend will include vast changes to computer and payment systems and many say it is essential that everyone acts together, particularly in relation to standard settlement instructions (SSI). Such instructions are critical since they show agreed settlement instructions with counterparties. They can include information on a bank, branch or specific department. Bankers say SSIs need to be clarified well in advance of the conversion weekend so that banks know where euro payments should be sent. But within London, Europe's financial heart, some argue there is resistance among certain banks over the need for everyone to be on the same playing field. British banks in particular have been singled out. ''The UK banks are resisting change mainly for conservative reasons and others which have to do with a lack of leadership from the top,'' said another banker. Replying to such charges UK bankers say talks held with other banks over recent months have led to an ironing out of any differences. ''On SSIs we have recommended and the Bank of England has recommended that banks should provide each other with any changes by the end of next month,'' said William Mason of the British Bankers Association. ''The only differences of opinion I have been aware of have been about the desirability of changing SSIs on existing deals.'' Apart from SSIs, commerical bankers say there has been inadequate testing of wholesale payment systems such as TARGET and the Euro Banking Association's (EBA) euro system. While no one believes the potential chaos on the first few trading days will be fatal to the euro, bankers say the ECB must become more aware of such problems. ((London newsroom, + 44 171 542 7770)) Copyright 1998 Reuters Limited

To: John Mansfield who wrote (16661)	8/26/1998 4:38:00 PM
From: goldsnow	Read Replies (3) \| Respond to of 116764

Ex-Fed chief Volcker predicts stable euro 10:45 a.m. Aug 26, 1998 Eastern BONN, Aug 26 (Reuters) - Former U.S. Federal Reserve chairman Paul Volcker was quoted on Wednesday as saying Europe's single currency would be stable thanks to the strong independence of the European Central Bank (ECB). The ECB would enjoy considerable freedom in setting monetary policy because it did not have to deal with a single European government, Volcker said. ''The euro will be stable because the ECB is the most independent central bank in the world,'' Volcker told Germany's Rheinische Merkur newspaper in an interview. ''The greatest pressure that can be exerted on a central bank is that from the respective government. But is there a real European government? No.'' The 11 countries that have signed up to join economic and monetary union (EMU) next year have agreed to form an informal policy forum called the Euro-11 council. Germany has fought to ensure the panel does not meddle in monetary policy. Volcker, 70, chaired the Fed from 1979 to 1987. He has recently chaired a commission evaluating compensation claims against European banks on behalf of survivors of the Nazi Holocaust. He said the euro had great political significance as a stabilising factor on a continent that had suffered two devastating wars this century. He said he also believed it would bring economic benefits. ''There have already been too many wars with Germany, too many conflicts,'' Volcker said. ''Now there is the chance to unite Europe. This aspect is perhaps more important than the many economic factors which speak in favour of the euro.'' Volcker's remarks were published in German. Copyright 1998 Reuters Limited.