##tingency planning is to provide for worst case scenarios, and eventually to enjoy the pleasure of having been wrong and unnecessarily pessimistic. i must congratulate the organisers of this conference for putting together a very well - structured and detailed programme. all the aspects and phases of this challenging exercise will be covered in the discussions of today and tomorrow at this conference. – 2 – 2. the importance of the y2k problem for the global financial market it is not necessary to elaborate on the importance of electronic data processing and communication systems for financial institutions and markets. it is, therefore, understandable why there is great concern that financial systems will be severely disrupted when the year 2000 arrives and computer systems have not been corrected to be able to process dates into the next century. taking account of the extensive globalisation of financial markets, the exploding volume of worldwide cross - border transactions and the integrated inter - relationships of financial institutions and markets throughout the world, disruptions, if they do occur on any large scale, will not remain localised. just as the east asian financial crisis of last year had a contagion effect and spread throughout the rest of the world in a matter of months, a breakdown in computer systems as a result of a y2k - bug infection in any important financial centre will spread to other places. the only difference will be that in case of a y2k problem, the transmission mechanism is open, uncontrollable and instantaneous. the potential for severe disruption of the global financial system is enormous and could have dire consequences. because of possible “ knock - on ” effects or “ chain ” reactions, it is imperative that all countries in the world take the necessary actions to remove the year 2000 threat. these actions can best be initiated and monitored by governments and financial regulators. there will be a temptation for countries that do comply timeously with the problem to restrict trade with, and reduce investment in, countries that are not seen to be making sufficient efforts to become compliant or are unable to satisfactorily prove compliance. in the present volatile world financial markets, the smaller economies with emerging financial markets, such as south africa, cannot afford to add this additional burden to the perceived high risk exposures already linked to doing business with them. 3. the importance of the y2k problem for financial regulators the main purpose of this conference is to assist financial regulators of the southern africa region to bring themselves and their constituencies, that is the financial

bundesbank endeavoured to curb the development of the d - mark into a reserve currency. even so, on account of its stability advantage and the associated confidence of global investors, the d - mark grew into the role of an international currency. there can be no doubt that the international role of the euro has the potential to develop further. notwithstanding the eurosystem ’ s neutral stance of neither fostering nor hindering the international use of its currency, the euro does provide a potential alternative to the us dollar as an international currency. the neutral stance is not incompatible with efforts to promote an efficient and fully integrated financial market for euro - denominated assets and liabilities, which may have the indirect effect of making the euro more attractive to international investors. as the euro ’ s international use is expected to gradually increase over time, this will have policy implications for the relationships of the euro area with outside countries. ii. the international use of the euro let me first turn to the use of the euro as an official reserve. the introduction of the euro caused a structural break in the composition of the foreign reserve assets of the euro area countries because those foreign reserves which had previously been held in the predecessor currencies of the euro notably d - mark - became domestic assets as soon as the single currency was introduced. if this effect is disregarded, the euro has held up well compared with its constituent predecessor currencies. the euro has established itself as the world ’ s second most important reserve currency. our calculations show that - after eliminating the “ automatic domestication effect ” at the turn of 1998 - the d - mark, french franc, dutch guilder and private ecu had a combined share of 14½ % in the global foreign exchange reserves at the end of 1998. by comparison, the corresponding share held by the euro at the end of march 1999 was just under 14 % and in the subsequent four quarters it remained more or less constant at just over 13 %. based on the exchange rates prevailing at the start of 1999, however, the euro ’ s share actually increased during 1999 by ¾ percentage point and in the first quarter of 2000 rose by a further ½ point to almost 16 %. the euro has thus surpassed the combined share of its main constituent predecessor currencies. the us dollar still is the unchallenged leading reserve currency - and will remain so for the foreseeable future. according to the latest figures 67½ % of the global foreign exchange reserves in march 2000 were