Banks will act as converters For non-cash payments, banks will have the obligation to act as converters. For example, if a payment is made during the transition period in, say, the national currency to a holder of a euro account, this payment will be automatically converted by the bank. There could be a charge for this operation, but competition is likely to keep such charges low. Simplification of treasury management Reducing the number of currencies used in Europe will lead to a simplification of treasury management for European companies. It will no longer be necessary, for example, to review daily balances in multiple currencies.
Most companies try to hedge their currency risk.
Hedging methods bear a cost and can only serve to cover certain cash flows within a limited time frame. Reduction in working capital needs Most companies attempt to monitor balances in respective currencies to limit excess liquidity with small financial returns or to avoid the negative balances which can lead to high overdraft costs. This monitoring requires daily work and interaction with the bank. It calls for an inflated treasury float in order to guarantee that each account shows a positive balance. The introduction of the euro will lead to larger, more liquid, and more differentiated capital markets.