"Clearing and cash management services are important platforms to make the start of the new integrated currency smooth," Soichiro Miyaki, managing director for Deutsche Bank AG's Tokyo branch, said in a recent interview.The sense of urgency among Japanese firms preparing for the euro was heightened in May, when the 11 "first wave" countries that will adopt the currency from its January inception were decided, Deutsche Bank officials said.

An increasing number of clients are actively gathering information about euro cash management systems, said Harald Eisenach, head of Deutsche Bank's Tokyo corporate banking global relationship department.

The launch of the single currency would benefit Japanese companies and financial institutions conducting business in Europe by reducing the number of bank accounts they need to maintain, Deutsche Bank officialssaid.

For example, Japanese firms would need only one account to conduct business in all first wave EMU countries, whereas they currently needed at least 11 -- one for each currency.

"We have a mandate from a major Japanese manufacturer for a pan-European cash management system, which has already been in the implementation phase for a few months," said Eisenach, adding that the bank was initially targeting 25 Japanese multinational firms for such services.

While companies had until January 2002 to set up euro clearing systems -- until then electronic clearing and payments can be made in either the euro or the 11 "legacy" currencies -- the earlier firms switched, the better off they would be. "Companies can cut down on personnel and administrative costs" by adapting to the euro, Eisenach said.

However, some firms had met internal resistance to implementation of new cash management systems from workers fearing job cuts, he said. Deutsche Bank officials said that while the euro had positiveimplications for companies, it posed stiff challenges to European banks.

Banks face increases in costs as they adapt to the euro, and expect revenue to decline due to falls in income from foreign exchange transactions, Miyaki said.

"I personally expect that the euro may prove a catalyst for a restructuring of Europe's financial sector," Miyaki said.

"Not all banks will be able to compete as pan-European wholesale banks. Some may be forced to operate as regional banks or to focus on a limited range of products," Miyaki said. "This year in the US, there have been various mergers of major banks. Such a trend may be seen in Europe next year and the year after as EMU progresses," he said.

At least 18 mergers and acquisitions involving European financial institutions took place in 1996 and 1997 alone.

Other European banks are closely watching Deutsche Bank's efforts to promote its euro clearing and cash management services.

Christopher Tregellis, product & segment strategy director for Barclays BankPlc, in Tokyo recently to visit customers, said Deutsche Bank and Dutch commercial bank ABN Amro NV had been "making a lot of noise".

"But we will have to wait and see how they do in terms of service and price level," he said.