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Drachma-tic testing for big UK bank

Impeccable source tells Euromoney Skew about big UK bank testing and preparation for Greece leaving the Euro.

As the sovereign debt crisis rumbles on, Greece – a thorn in the side for many and the crux of the problem for investors in the Eurozone-  is still on the watch list as a potential Euro departee.

While Eurozone leaders have been pushing to quell market fears on a sovereign debt default contagion by urging Greece to seal a deal, many experts have furiously stated that it would be highly unlikely that Greece would leave the euro.

However, it seems some banks have taken the initiative to try and prepare for the worst.

According to a source close to operations in transaction banking at big UK bank, the bank has been rigorously testing and preparing its payment systems for the past 6 months, to see if it could cope with Greece withdrawing from the Euro and switching back to the Drachma.

“[The bank] has been working on the scenario that if Greece were to leave the Euro over the weekend, yet it was announced on a Monday (which is a feasible scenario these days) – how would our systems cope with facilitating payments and moving cash if accounts were in Drachma? At the moment [the bank] are rigorously going through the process of analysing all businesses and systems to figure out how the systems would cope if Greece and even countries like Italy and Spain were to leave the Euro.”

Apparently, the big UK bank have been working closely with the UK’s Payments Council, by feeding back information and analysis of how systems would cope if Greece were to revert back to the Drachma. 

“According to the same source, the transaction banking unit have already seen a switch in money management in Greek accounts. The transaction banking unit are already seeing money being moved/transferring out of [the bank] PLC accounts in Greece, but it’s actually out of concern for collateral and not counterparty risk.” 

While, this may seem like standard practice across the industry, there is no collective industry group working on this issue with the Payments Council.

In addition, according to sources who contacted other firms on the same matter, one of the world’s largest payments and financial messaging providers has not even started to conduct similar testing within its technological infrastructure.

- Euromoney Skew Blog

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