Companies want to list in euros

UK companies have made it clear to the Department of Trade and Industry (DTI) that they want it to be made easy to redenominate their share capital into euros at any time after 1 January 1999.

Although few indicated that they had firm plans to do so, the strong preference for being able to suggests that many companies will in fact list their shares in the new single currency from next January. The Chancellor of the Exchequer has already indicated that the Government will amend the law to make this possible.

The result of the consultation with companies is one of the key findings reported by the Bank of England yesterday in its latest regular bulletin, "Practical Issues Arising from the Introduction of the Euro".

The traditional UK Bank Holiday is on its way out, the document warns. London markets will come under competitive pressure to operate on the same business days as the Euro area.

It also issued a warning about how far there is yet to go before Britain's financial system is ready for UK membership of the single currency.

The Bank highlights several areas where urgent action is needed. But it also suggests that some uses of the euro will swiftly become widespread even if Britain stays out.

The report hints that the euro might become as important or even more important than the dollar as an international currency. Euro bond markets will be bigger and deeper than the sum of their parts, and market liquidity is likely to improve.

The Bank's own Ecu Treasury Bill tender next month will, for the first time, mature as euros in 1999. It will issue repayment details ahead of the 14 July tender.

However, the Bank emphasises some ways in which the UK is seriously unprepared. It said it will shortly be conducting a new survey of financial institutions to assess their readiness for the launch of the single currency next January.

One problem it highlights is that there would be a severe shortfall in the ability to ship out the new euro coins when Britain joins the single currency.

It would be 2003 at the very earliest before euro notes and coin could be issued. The report says: "Regardless of the position on the timing of UK entry, action should be taken to reduce the circulation of sterling coin as soon as possible."

The report also notes the ECB's opinion that the Bank of England Act is incompatible with the Maastricht Treaty. No provision has been made, it says, for the integration of the Bank of England into the European System of Central Banks.

One issue companies raised with the DTI was whether they would be able to convert their share capital into shares of "no par value", which would avoid the need to redenominate individual shares. Instead, they would redenominate the total share capital and have the same number of shares in issue after conversion.