According to federal regulators, most banks are ready to meet the millennium without a hitch. Bankers are no longer worried about the Year 2000 computer glitch -- unfortunately, their customers still are.

Banks Face a New Challenge: Fear With the rapid approach of the new millennium, banks are racing to meet compliance deadlines  but their biggest problem may not be a systems failure. Banks across the country are now doing their best to squash another kind of Year 2000 bug: panic. Federal regulators recently told a congressional committee that 97 percent of U.S. banks were well on their way to eliminating the Y2K computer glitch long before it could cause trouble. Even one of those regulators, the Federal Deposit Insurance Corp., said that no banks were expected to fail as a result of the Y2K bug. Depositors, however, are just not buying it. Many are planning to withdraw at least some of their savings at the end of the year. A Gallup poll conducted in March revealed that 55 percent of the respondents expected banking and accounting systems to fail on Jan. 1, compared with 40 percent for food and retail distribution systems. Sixty-six percent said they would ask for extra copies of their account balances and financial records. And although only 15 percent said they would pull all their money out of the bank, twice that number said they plan to withdraw and stockpile cash. "I'll just withdraw it for a few days," says 76-year old Andy Todd of Cambridge, Mass. "If there hasn't been a problem, I'll put it back in the first week (of January)." David Beryl, a 28-year-old human resources manager, claims he's not worried about a collapse in the financial system, but says he's "going to act like it's any long weekend and take out some extra money in advance. It doesn't seem like there's going to be some doomsday thing, but there could be a small problem here or there." Other customers prefer to lock their money up. Safe deposit boxes are at a premium. Banks are receiving an increasing number of requests from people who want to place cash in a safe deposit box at the turn of the millennium for fear of Year 2000 computer glitches. The demand is so high that consumers in some cities are being forced to wait months before they can get a box. To prevent any year-end financial mass hysteria, government agencies are now urging banks to put more effort into educating and informing their customers about the Y2K bug. In response, banks are developing marketing campaigns to reinforce the message that Y2K will not cause a crisis. Some bankers are even considering plans to stay open on the New Year's Day holiday to reassure people. According to Edward G. Boehne, president of the Federal Reserve Bank of Philadelphia, dealing with the fear is as important as tackling the bug. "Beyond the technical side of fixing the century date-change problem lies the issue of educating the public and the media about what the true situation is rather than letting anxiety build through lack of knowledge," he says. "We should strive to give the public confidence that banks are on top of Y2K issues." Renee Zilka, information systems manager for Harbor Federal Bancorp in Towson, Md., agrees. "The biggest thing we want to tell people is 'Don't panic, your money will be safe.'" Banks have begun distributing brochures that describe their Y2K preparedness program. Many have also established 24-hour telephone hotlines and statement mailings designed to answer frequently asked customer questions and avert panic. Some are conducting special staff training sessions designed to instruct employees how to better reassure customers. Barbara Harding, chairwoman of Phillipsburg National Bank in Warren County, N.J. says, "Customers are asking more questions. We're actually going through an education process with our staff now on how to talk to customers about these things." Despite these efforts, banks may find themselves in a position where a large number of depositors begin demanding their money as the New Year approaches  and they won't be able to pay up. To head off such a situation, the Federal Reserve has said it will be ready to pump an extra $50 billion into the banking system to cope with a surge in withdrawals. As the year draws to a close, banks are going to face an uphill task convincing customers that there is no need to panic. Russell G. Johnson, Group Manager of operations for Provident Bank of Maryland and leader of the bank's Year 2000 compliance effort feels that this is going to be the biggest challenge of all. "We know that we're prepared," he says, "But whatever the reality is, the perception is always worse." We are interested in what you have to say! Please send us feedback via our Article Rating Form

-- Norm (nwo@hotmail.com), May 26, 1999

Answers

Banks are only a conduit. They are exposed to all their loans and other financial institutions. Its a web, a network of interdepenencies. If the banks are OK, and there are reports out now saying 50% will not be ready, then there is still the problem of outstanding commercial and consumer loans. Dig?

-- dash (dit@dot.space), May 26, 1999.

Dash-Do you have a reference to the report that says 50% are projected to fail?

oh, and don't call me

-- surely (noone@home.com), May 26, 1999.

<Bankers are no longer worried about the Year 2000 computer glitch -- unfortunately, their customers still are.>

WELL - IF BANKS AREN'T WORRIED - WHY DO THEY TRY TO GET LAWS LIKE THIS PASSED?

Bill to protect agencies & banks from Y2K suits passes first vote BY MARTHA STODDARD Lincoln Journal Star Victims of the millennium bug would have a harder time suing government agencies or banks under a bill given first-round approval Wednesday.

LB661, sponsored by Speaker of the Legislature Doug Kristensen of Minden, would give extra liability protection to government subdivisions and federally insured financial institutions for problems stemming from the so-called Y2K problem.

But both groups would have to prove they had properly prepared for the computer date change to keep their protection.

"Hopefully this statute will pass and hopefully we'll never have to use it," Kristensen said. " I don't think catastrophe will happen, but there will be some small glitches." 

LB661 would protect government agencies and banks from lawsuits stemming from any date change problems they experience during the change from 1999 to 2000.

As amended by the Judiciary Committee, the bill would allow suits only by people who have a contract with the government agency or the bank. Class-action suits would be barred against the government and would be allowed against banks only after they have had six months to correct the problem.

"I don't think the protection they're being afforded is all they wanted," noted Sen. Kermit Brashear of Omaha, the chairman of the Judiciary Committee. http://www.journalstar.com/archives/052099/neb/sto3

-- Cheryl (Transplant@Oregon.com), May 26, 1999.

Cheryl,

"Class-action suits would be barred against the government and would be allowed against banks only after they have had six months to correct the problem."

Correct what problem? A balance problem? Not an amortization problem, those have been fixed. What, then? An interest-earned-on-CDs problem?

Then, we should see similar legislation barring banks from foreclosing on Y2K-impacted consumers until at least 6 months after the rollover? Yes?

Polly (skippy@innermongolia.com), why do banks need this sort of protection?

-- Lisa (lisa@work.now), May 26, 1999.

Norm,

I hear you.....I just don't think we can avoid some degree of bank run later this year. There are too many people (like myself) with enough doubt about the system who are not going to leave their hard- earned $ in there. Even though I recognize the great progress made in our country I suspect some problems will slip through here and that our exposure to foreign country problems will impact our American financial situation. FDIC guarantees sound great but IF there was a big problem they can't cover that much.

I realize this may sound flakey to you but it is real and I know I am not alone. Even if technological problems don't actually cause big problems, human nature will. Personally I chose to move my IRA out of stocks to a cash reserve acct - would have pulled out completely except for the KNOWN $ loss of penalties and taxes......we will just have to wait and see. If it looks lousy in November/December I will pull it out and then put it back within 2 months to avoid penalties if all looks better after Y2K.

Snicker if you will, but this is real and I suspect vast amounts of people will do the same things. Cheerleaders trying to rally support for the banking system will only make matters worse IMHO by bringing more attention to the issue. What do people have to gain by leaving their money in the bank/stock market from, say, July '99 to Dec. '99? A few percentage points if all stays normal? Is that enough to justify risking leaving it in the system? I am not attempting to scare folks, I hardly talk about it at all in fact - just the occasional chat w/friends and family and VIRTUALLY EVERY ONE feels the same way!

Hoping nothing happens but preparing for the worst,

Kristi

-- Kristi (securx@Succeed.Net), May 26, 1999.

Why do you keep saying "later this year". If you are not putting away a little each month in a sock, you are missing the point. When is too late? Start now.

You could help me with this question. Where is your money safe? If you believe, as I do, that the stock market is due for a fairly large downward motion and there will be some default on bonds, where is your money safe? I have counted out gold because the governments of the world are manipulating the price. Silver has always been a loser. Can you give another suggestion? Maybe paper money and coins?

-- John Layman (jlayman@srv.net), May 26, 1999.

Yes....now is the time to start - I am not waiting till "later this year". I refer to "later this year" because IMHO we will possibly see a very anxious public 2nd guessing their complacency in maybe November/December. I have no way of knowing for certain. Just doing the best I can. Each of us need to find our own way when we discuss something this personal.

Good luck!

Kristi

-- Kristi (securx@Succeed.Net), May 26, 1999.