Banks warn over single currency timetable

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The Independent Online
British banks warned yesterday that the worst possible outcome of the discussions over monetary union would be Britain delaying a decision because of political disputes but eventually signing up for full participation on the same timetable as everybody else.

A joint paper by the British Bankers' Association, the Association for Payment Clearing Services and the London Investment Banking Association said this could be "highly disruptive for all sectors of the economy and expose UK financial institutions to real competitive disadvantage". The chain of events the bankers fear is a delay in a UK decision to beyond early 1998.

The risk is that any delay in signing at that stage could be followed by a belated British decision to catch up and complete the transition to a single currency by 2002.

The paper said that if the changeover was to be completed by the target date of 2002, detailed specifications for the investments required would have to be drawn up in 1997 and implementation would have to start in 1998.

But bankers are concerned that with an election next year and wrangling continuing in both main political parties, the chances of a clear-cut decision in 1997 or early 1998 do not appear good.

The last estimate for the cost of monetary union to British banks, drawn up in 1994, was pounds 1bn, but that assumed a single "Big Bang" transition. Bankers said that the cost would be at least 50 per cent more with a phased transition over several years of the kind now planned.

The banks' paper backed the claim by Eddie George, Governor of the Bank of England, that the City was likely to benefit whether Britain stayed in or out of monetary union.