British banks look for Y2K bailout to prevent bank run : LUSENET : TimeBomb 2000 (Y2000) : One Thread

'Bug bond' sought for 2000

By Jill Treanor and Lisa Buckingham Friday May 14, 1999

Britain's largest banking groups are negotiating with the Bank of England over the scale of collateral needed to ensure that the central bank will act as a 'lender of last resort' if the financial system is threatened with meltdown by the millennium bug.

Negotiations have been spurred on by the banks' experience of the early days of trading in the euro when the entire European banking system faced repeated liquidity crises.

The banks are making preparations in case the payments system becomes gridlocked as public panic prompts massive demand on cashpoint machines while computer glitches threaten multi-billion pound behind-the-scenes financial settlements.

Banks estimate that customers will try to take between #2,000 and #3,000 in cash out of their accounts during December. They are expected to try to withdraw up to #300 on the day before the Christmas holiday begins.

The Association for Payment Clearing Services has started a series of focus groups to establish what the public is most concerned about. It is already working on the basis that #15bn will be taken out of cashpoint machines next Christmas - 50% more than usual.

Banks have started talks with the Bank of England, not only on the amount of deposit they will have to pledge but also the type of financial instrument which will be regarded as acceptable. The Bank of England is thought to be extending the range of instruments which it will accept as collateral at the time of the millennium in order to ensure that liquidity in this area does not dry up as well. 'Typically we are expecting we will have to put up AA (high-grade) security instruments,' said one senior banker involved in the talks. 'We are only being sensible - clearly we have to have contingency plans.' A group of Europe's most prominent bankers - known as the Heathrow Group - which steered the continent away from crisis as the euro was being born - is believed to be involved in planning for the millennium, the date at which some computers may fail because they cannot cope with dates after 1999.

An organisation made up of 170 of the world's most influential financial institutions, known as Global 2000, has started debriefing top European banks on the way in which the introduction of the euro was handled in the effort to build contingency plans.

The banks are hoping to avoid having to call on the Bank of England to inject liquidity into the market even though they predict that cash problems stemming from the millennium bug could crop up from as early as September and that they will almost certainly last until the end of February.

The Bank of England has issued guidance on preparing for the year 2000 and is keen to minimise any sense of panic in the financial markets.

Nevertheless, its executives admit in their latest report on the issue that liquidity at the end of this year is likely to be 'less deep' than at a normal year end.

Britain's banks are worried not only about the public being able to gain access to its savings but about the commercial banks' dealings with their clients who might not have upgraded their computer systems to guard against a crash at the end of the millennium.

There are further worries about banks in some overseas territories, although poor countries with only the most basic systems are expected to cause fewer problems than some of the more developed economies.

The banks are already putting technology upgrades on hold and taking extra precautions about trying to introduce any new software ahead of the millennium celebrations.

There is even speculation that some mergers might be put on hold to ensure that any potential clash of systems is avoided.

-- Mron (, May 15, 1999


And as if the hardware Embedded Systems weren't enough, there are SOFTWARE embedded systems that use encoded and abstracted dates. My computer has 1800 of them. Heavens only knows how many support the Funds transfer system, CHIP$, etc. developed years ago, some existing only in compiled object code!

-- K. Stevens (, May 15, 1999.

Hey, K.Stevens, lets not sugarcoat this -- you left out the problem of non-compliant Y2K banks infecting Y2K compliant banks (assuming that there are any) with bad data!!!

-- King of Spain (, May 15, 1999.

Where is Flint and Hoff when you need them?

Guys, there is a financial collapse looming.

Bank on it :)


What about the recent EURO cover-up that is only now surfacing?

Well come on then, speak up!!!

-- Andy (, May 15, 1999.

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