Deutsche Bank executives have been traveling the globe to educate corporate clients about the arrival of the euro.
Over the past two years the bank has been holding free seminars to get customers thinking about what they need to prepare for the Economic Monetary Union, said Scott Moeller, managing director of the Deutsche Bank's EMU project.
These have sometimes included a Monopoly-like board game created by the German bank to teach customers about the euro. Mr. Moeller said Deutsche bankers have played this board game with hundreds of chief financial officers and treasurers in many countries.
On Jan. 4, 11 European countries will merge their currencies into one, the euro. According to Mr. Moeller, who is based in London, educating clients to think about compliance ahead of time is part of good customer relations.
It will also minimize any conversion problems these industrial companies might have, which could impact the financial institutions they work with, he said.
As one of the largest banks in the 11 countries converting to the euro, Deutsche Bank has a vested interest in creating momentum in the issuance of euro-denominated financial instruments. Frankfurt-based Deutsche has had a project dedicated to the euro conversion since 1995. Mr. Moeller joined the bank in 1996 from Morgan Stanley.
The bank will spend about $350 million on systems and operations before the conversion, he said, not including advertising, marketing, and mock rehearsals involving hundreds of employees worldwide that Deutsche is holding in preparation for conversion weekend.
Though the German bank will probably benefit more in the long run from the new European currency, banks and brokerages outside of the 11 participating countries will not have the huge up-front cost of converting their entire operation, Mr. Moeller said.
"In the short term, they may realize a higher cost-reward ratio," he said.
But American banks and brokerages that have carved out a niche on the Continent will not be making the euro their currency of accounting.
"They won't have to offer the euro to all of their customers, just those in the euro zone," Mr. Moeller said.
Mr. Moeller predicted that pricing on euro-denominated bonds would be tighter than dollar-denominated bonds over the first six to 18 months after the currency is introduced because of pent-up demand.
"Initially, euro-denominated paper will be in very short supply," he said.
Mr. Moeller said some American companies he has talked to are interested in issuing euro paper, particularly those that have operations in Europe. In this way they would avoid the currency swap costs. But some unrated American companies also think they could get better spreads on euro paper, he said.
Mr. Moeller said the euro might eventually challenge the dollar in global capital markets. He said investor interest is strong, particularly among large Asian investors, who want to diversify their dollar-heavy portfolios.