Despite assurances from the Bank of England at midday that conversion to the euro is "going smoothly," problems may remain undetected until settlements begin tonight according to Paul Cantwell, overseer of euro practice for IT consultancy Anderson Consulting.
Foreseeing no "catastrophic problems" for computer systems, and acknowledging that weekend preparations went as well as anyone could have hoped, Cantwell warned: "That was only a dress rehearsal. Only today will they get on stage together and tonight will be the first performance when we will see if the chorus and orchestra are playing in the same key."
The problems banks and financial institutions face include:
- Lack of Standing Settlement Instructions (SSI). New SSI's needed to be created for the euro so clients can tell banks which account they want euro shares put into. Despite a Bank of England deadline of September 1998, many banks are yet to receive SSI's from clients according to Cantwell.
- Rounding errors. Different conventions for rounding up the euro in different markets could lead to delays in processing and fails in trades as deals are converted into euros.
- Pressure on already fragile' computer systems. Although conversion programmes have been successfully implemented this weekend, rules on how data should be converted are not always clear, according to Cantwell.
Cantwell predicts long hours for back office staff as they tackle euro glitches - particularly when deals are being processed during the night.
Barclays made its first euro payment for a corporate customer at 9:03am today and the deal -- importing wood from Germany to England -- was "successfully completed" according to a Barclays spokeswoman.
Trading this morning and for the rest of the week will remain quiet as traders get to grips with what the euro means according to the spokeswoman. But as deals in the euro pick up the main cause for concern will be "human error" as dealers get used to different conversions and calculations. "Although there is no evidence of errors so far, it would be surprising if it doesn't happen somewhere along the line," she said.
Robin Moser, head of fixed incomes and foreign exchange at business bank Credit Lyonnais described the morning's trading as "pretty uneventful" with all systems currently running smoothly. According to Moser, traders are coping well with the new system. The biggest surprise the euro has so far thrown up is how quickly it has replaced the German mark as the currency to deal with against the US dollar.
Euro expert and IDC analyst Mirko Lukacs described today as D-day for the Euro. "From today all systems will be involved in live transactions and conversions," he said. Watching progress in the Netherlands, Lukacs has seen no problems thus far and praised the immense amount of preparations done by banks and financial institutions. "It has been the largest ever IT operation for a single event and impacts on all systems. All banks have been well prepared," he said.