Know-how and experience of EURO implementation

Breakfast – US Chamber of Commerce

Elena KohútikováMember of the Management Board & Executive DirectorVUB Bank

Člen skupiny Intesa Sanpaolo

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Where we are in the present...

6 months before assessment term completion – fulfillment of Maastricht criteria at the sustainable basis

7 months before preparation of European Commission and ECB convergence reports

9 months before Council of EU derogation recall

9 months before the set of conversion rate

10 months before the start of obligatory dual pricing

Almost 15 months before euro changeover

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Maastricht Criteria Compliance

Sources: NBS, Ministry of Finance SR, EUROSTAT, NBS and VÚB calculations

*Public deficit for 2005 and 2006 is evaluated without pension reform costs as it is allowed by transition period set by Eurostat

* Public deficit for 2005 and 2006 includes also pension reform costs

2006 2007 2008

Public deficit including pension reform costs (max. 3%)*

3,5 3,9 2,9 2,3

Public deficit excluding pension reform costs (max. 3%)*

2,9 2,7

34,5 30,8 31,8 31,0

2,8 4,3 1,7 1,9

3,5 4,4 4,3 4,2

In ERM II since November 28, 2005

Nominal exchange rate (8.10.2007 33.63 EUR/SKK)

ERM II range ±15% from parity (30.1260 - 40.7588)

Criteria is currently fulfilled and there are expectations of fulfilling it

Inflation (HICP, %) (at the present -AUG 2007 - max. 2,53%) There are expectations of fulfilling

this creterium

Long term interest rates (%) (at the present max. 6.3%)

Criteria is currently fulfilled and there are expectations of fulfilling it

Criteria 2005Forecast

Fiscal criterium (% GDP)

Public debt (max. 60%)

Criterium is currently fulfilled and there are expectations of fulfilling it

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Legal conditions for euro changeover

At the end of September 2007 SR Government approved Umbrella Act that has already been commented by ECB and submitted into a parliament. Its final version will be probably known at the end of 2007.

Umbrella act in most cases is in line with National Euro Changeover Plan in SR but it is still very important to read it as it specifies some important parts for companies´ euro plans preparations.

By this time there are missing preliminary drafts of general obligatory instructions that should specify some act assigments in order to allow implementation into IT changes.

From this point of view it is likely there are some reconfigurations that has been implemented into systems – however I suppose there will not be any radical changes and most of the adapted systems will not be changed.

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Companies´ preparation for euro changeover

By analyses made recently, most of companies have already started with euro changeover preparations. In spite of that especially in small and medium enterprises euro preparations process very slowly. In some companies they have not even started.

One of the reasons is that companies have not acquired their inherent convince about euro changeover. Because of this, companies do not feel „business pressure“ which would have started them.

The other reason is that some companies think they still have enough time to begin euro changeover preparations.

Despite of that, it is important to start preparations because the final decision will be known sometime in the middle of 2008, when it is too late to bigin.

Many companies wait for appropriate legislation. Without it they don´t want to start the euro changeover preparations.

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Euroteam creation

Basic recommendation received from Slovenia, as well as Malta and Cyprus, is that approach of euroteam creation is the cornerstone of success

Some euroteams are not managed by member of board but there are appointed persons responsible for euro changeover on the different operational levels – there is the recommendation to sponsor euroteams by member of board and to pay sufficient attention to euro changeover plan fulfillment – I recommend the periodic report for board of directors (at least once per month)

Shareholders should be informed about euro changeover preparations at the every supervisory board meeting

Even if you outsource euro changeover preparation– create your own euroteam and manage the whole process by yourself

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Euro plan preparation

Euro plan should involve: Process analysis from the users point of view as well as the IT integrity point.

It is useful to implement the changes from 3 points of view:- dual pricing- euro conversion- reporting

Testing – of particular solutions within the organization as well as integral testing from the broader external context (system of payments, internet dealing and etc.)

Communication plan – within the euro project, towards your own employees, suppliers and customers, clients, banks and etc.

Education plan – especially towards your employees Business continuity plan – is very important part of the euro process

especially from the point of risk identification and resolution Stability plan – for key employees involved in euro changeover process

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Euro – is not just about risks and costs, it is about opportunities

It is important not to forget about the preparation of company´s middle-term business plan – euro adoption advantages and disadvantages

This business plan should identify conditions which will occur because of economy environment changes where they will do their business without exchange rate risk – euro will bring more transparent economy environment, growth of competition on the foreign markets as well as on domestic market. As we get the easier access to foreign markets, our competitors will get the easier access to our market as well.

Euro means unrepeated costs but in the course of proper approach towards new business opportunities it can represent long-term profit – all these depend on the company attitude

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In the end...

Companies which have not started yet...- it is necessary to start at least the identification of processes connected to euro changeover and analyses

- prepare your own euro plans and keep more time for testing

Companies which have already started...- review your contract with software suppliers no to pay twice for what you have already got guarantied and paid

- pay your attention to whole process in order to keep it „under control“

- follow legislation changes alone or within related associations to be every time in compliance with law

- companies which want to be pre-loaded with euro cash should contact its bank as there is already running the identification process of required euro notes and coins structure

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And ... take euro as an opportunity for you

Opportunity to consolidate your market position – think about what changes are necessary in your investment and business strategy in order to take euro changeover advantage

Early changes in your business strategy may bring you considerable advantage

to your competitors

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Thank you for your attention.