European Monetary Union: Legal compliance for IT systems — Après ‘Le Weekend’
| Pages | 361-378 |
| Date | 01 April 1999 |
| Published date | 01 April 1999 |
| DOI | https://doi.org/10.1108/eb025023 |
| Author | Alan Hawley |
| Subject Matter | Accounting & finance |
Journal of Financial Regulation and Compliance Volume 7 Number 4
European Monetary Union: Legal compliance
for IT systems — Après 'Le Weekend'
Alan Hawley
Received (in revised form): 27th August, 1999
IT & Digital Media Group, Hobson Audley Hopkins Wood, 7 Pilgrim Street, London EC4V 6DR;
e-mail: ahawley@hobsonaudley.co.uk
Alan Hawley is a solicitor whose career
includes seven years as a commercial
liti-
gator with Linklaters & Paines, five years
in-house in Bahrain and Dubai with a
large Arabian Gulf trading company, and
nine years in-house with Digital Equipment
Corporation in Reading, London and Paris.
His practice areas include all aspects of
computer contracts, technology and
soft-
ware licensing, distribution, agency and
other channels arrangements, outsourcing
and facilities management, electronic com-
merce and electronic evidence issues,
copyright, Internet law, data protection
law, database law, intellectual property
and competition law as it applies to IT,
international supply of goods and services,
Middle East commercial law.
ABSTRACT
A number of
articles
have been written about
information technology (IT) law aspects of the
euro,
and there is the implication that there is
something special about euro implementation
from the IT law point of view. The
conclusion
in this paper is that, even though the euro is
not 'just another currency', a euro IT
project
is
just like most other complex IT projects . . .
only more so. A euro IT
project
for a multi-
national in Europe could be as big as any
which that company has yet handled,
because
it
may well involve the introduction of entirely
new financial and
accounting
systems.
For that reason, customers should follow
proper
contractual
and project
procedures.
Sup-
pliers should be careful about what they include
in their warranties and
specifications
and should
avoid over-general or
over-generous
warranties.
In response,
end-users
must allow as much time
as possible, make the effort to scope their
requirements, to understand what they need and
to make sure that their
contracts
and schedules
capture all those needs.
The European financial and foreign
exchange markets appear to have effected
the transition to the euro with some suc-
cess.
The changeover which had to take
place in many industries over the 1998—
1999 holiday period was relatively trouble
free.
'In the event, there wasn't a lot to
report. A few glitches at major banks that
weren't difficult to recover and a minor
skirmish around some Post Offices in
southern France.'1 With some exceptions,2
the problems which have arisen appear to
have been caused mainly by inexperience
and human error on an individual basis, or
to a failure to predict volume require-
ments, rather than by structural software
problems. 'Money has been arriving in the
wrong countries, because euro-zone banks
arc inexperienced in settling deals outside
their home territories. Many mistakes are
said to have originated in Frankfurt banks
in the first couple of weeks of euro
Journal of Financial Regulation
and Compliance, Vol. 7, No 4,
1999.
pp. 361-378
Henry Stewart Publications,
1358-1988
Page
361
European monetary union: Legal compliance for IT systems
trading'.3 There were apparently major cash
clearing problems, and fears that the cash
systems were not adequate for international
business. But, on the information technol-
ogy side, the results are reassuring. Every-
thing seems to have worked. It should be
remembered, however, that this successful
result reflects an enormous amount of pre-
paration by the financial institutions, and
there is a danger of over optimism among
those who have yet to make the change.
A DOUBLE WHAMMY FOR THE IT
INDUSTRY?
Is Europe prepared for the euro?
Most wholesale financial institutions had to
be well prepared for the euro, since it goes
to the core of the service which they pro-
vide.
In addition, although the City of
London acquitted itself well, one might
expect preparation to be more advanced in
those countries which were always likely
to join European Monetary Union (EMU)
in the first phase, assuming they qualified.4
So far as the future is concerned, surveys
have indicated for some time that many
corporations in the UK are so caught up in
the Year 2000 (Y2K) compliance problem
that they are not focusing on EMU. Asked
in a survey commissioned by CAP Gemini
if they were prepared for EMU, only 38
per cent of UK respondents said yes, com-
pared with 65 per cent in Germany and 68
per cent in Benelux.5 This seems surprising,
when most businesspeople in the UK
appear to take the view that the UK
should join EMU earlier rather than later.
One consequence of this disparity is that it
is very difficult to pitch an article on the
subject to a general audience. Some readers
will regard many of the issues as 'old hat'
— something that they have already taken
into account in real projects for real clients.
Many others, perhaps working for smaller
companies, appear to have little idea of the
size and complexity of future conversion
projects.
Y2K and the euro6
There is some disagreement among the
experts as to whether or not the advent of
the year 2000 and EMU at roughly the
same time is a burden or a blessing.6 On
the one hand, Year 2000 projects are con-
suming a massive amount of resources, par-
ticularly experts in older systems. There is
doubt as to whether or not old systems can
be converted to meet the deadlines. On the
other hand, the company which has
planned ahead has the opportunity to deal
with both problems at the same time. The
answer may often be to purchase a new
system that is compliant for both Year
2000 and European Monetary Union.7 But
it is interesting to note that, in another
survey, KPMG found that 60 per cent of
its sample of European companies intended
to amend existing systems, 12 per cent to
purchase new software packages, and 6 per
cent to commission new software.8 Pre-
sumably this is because their existing sys-
tems are either tailormade, or complex, or
both.
Differences between the Y2K problem
and the EMU problem
Technical differences
Computer systems affected by the Y2K
problem have a technical limitation which
will prevent them functioning properly or
at all with the arrival of the Year 2000.
Computer systems unable to tackle EMU
may function perfectly in themselves when
the EMU is introduced, but the change in
outside circumstances will render non-
compliant systems useless to their owners.
Timing
31st December 1999 is the 'drop dead' date
for the introduction of Y2K-compliant sys-
tems.
With the euro, there is the respite of
a two or three-year transitional period, and
a number of companies, including IBM,
are planning a changeover towards the end
of the transitional period.
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