IRISH banks will be well prepared for European economic and monetary union (EMU) but still expect to face heavy once-off costs and ongoing revenue losses from the switch, the Irish Bankers' Federation (IBF) has said. The banking industry is also anxious to generate discussion about what the single currency will mean for its staff, customers and others.
The Irish banks are well aware that they will suffer financially from the move to a single currency, the briefing was told. Once-off costs are expected to be significantly more than the original estimate of £100 million, and ongoing revenue losses, mainly due to the absence of foreign currency transactions, are estimated to be at least £145 million a year.
"Banks will be at the centre of the change-over because of their position in the economy, and there will also be huge changes for the banks themselves. Because of this, it is essential that banks are ready," Mr Frank Sexton, the IBF's deputy director general, told a press briefing yesterday.
"It is all go. It's not really a question of whether or not we will participate; we must make a working assumption that we're in, and spend money preparing for that. If it doesn't happen, well, sin sceal eile," Mr Sexton said.
He added that there was now widespread confidence that EMU would start on time, in January 1999, and that the Republic would qualify for full membership from the beginning.
The IBF, of which all of the banks are members, and the Irish Mortgage and Savings Association have established a committee to examine every aspect of business that will be affected.
Under a steering committee, a series of expert groups had already been established, Mr Sexton said. These included: accounting and taxation costs; payments; legal; statistics and regulatory reporting; financial and capital markets; and communications.
Within these areas, there are important elements of the banks' commerce that must be addressed in time, the IBF believes. These include automated teller machines, cheque cards, wholesale and cross-Border payments, as well as the treatment of bonds, equities and interest calculation conventions.
"We have to be ready before the transition period, because we will have to deal in euros, to some degree, from Day One," Mr Sexton said.
The changes in some aspects of the banking business could take more than 18 months to effect, he said. The banks' clearing system, for example, required a two-year lead time, and a joint agreement had already been signed on this he added
"We've identified the decisions that require long lead times, and we're confident that we've made those," Mr Sexton added.
He argued that the single currency would promote investment, economic growth and stability, and render the Irish economy - then within a larger currency unit - less susceptible to volatility.
As banks prosper in such conditions, Mr Sexton said, EMU would be of benefit.
