To the Chief Executive Officers of State Member Banks, Bank Holding Companies,
Edge and Agreement Corporations, and Branches and Agencies of Foreign Banks
In the Second Federal Reserve District, with Significant European Union Operations:
As you know, on May 2, 1998, the Heads of State of the 15 countries in the European Union ("EU") formally elected 11 countries to enter Economic and Monetary Union ("EMU") on January 1, 1999. This action will result, among other things, in the establishment of a new single currency, the euro, which will replace the national currencies of participating member states over a three-year transition period. As you no doubt appreciate, this is an international economic event of almost unparalleled magnitude that will fundamentally change the way business is conducted in Europe. As such, it will have important strategic and technical implications for banking organizations with significant EU operations.
The Federal Reserve System, other bank supervisory agencies, and the major commercial banks have long identified EMU as an event requiring substantial preparatory planning and investment. The recent announcement by the EU further underscores the need for intensified preparations in the lead up to implementation. The implications of EMU for individual organizations will vary widely based on institutional profiles and strategic objectives, but all banking organizations involved in the European markets should review the potential impact and take appropriate action.
The SR Letter from the Federal Reserve Board Division of Banking Supervision and Regulation provides an overview of EMU and its impact on banking organizations, and briefly outlines the supervisory plan adopted by the Federal Reserve in assessing preparations at those supervised institutions deemed most affected by the advent of EMU. Over the next few weeks, this Reserve Bank will conduct a survey of selected banks, bank holding companies, and U.S. branches and agencies of foreign banking organizations to request information on their preparations for the introduction of the euro. All institutions to be surveyed will be contacted in advance.
Please contact Richard C. Heeseler, Examining Officer at this Bank if you have any questions.
