District Circular Letters
June 25, 1998
BANKING SUPERVISION AND REGULATION:
ECONOMIC AND MONETARY UNION IN EUROPE
To State Member Banks, Bank
Holding Companies, Edge Act Corporations,
U.S. Branches and Agencies of Foreign Banks,
and Others Concerned
in the Twelfth Federal Reserve District
Review of Issues Regarding Economic Union and the Conversion
of National Currencies in Europe
As you know, on May 2, 1998, the heads of state of the fifteen countries
in the European Union (EU) formally elected eleven 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. 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 according to 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
98-16 (SUP)] 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.
For Additional Information
For additional information regarding these matters, please contact our
Banking Supervision and Regulation Department, at (415) 974-2911.
FEDERAL RESERVE BANK OF SAN FRANCISCO
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