Received a letter on 12/13 dated 12/6 from Mercantile Bank based out of St. Louis, MO concerning end of the year foreign exchange transactions (in this case their foreign-currency denominated WorldCurrency Access accounts).

"While we feel confident that the Y2K software glitch will not disturb your account, the Foreign Exchange Committee established by the United States Federal Reserve has strongly recommended that banks not enter into foreign exchange transactions beginning on December 22, 1999 and ending on January 10, 2000. As a result of their recommendation, most major banks are already indicating that they will not facilitate any foreign exchange transactions during this period.

Due to the lack of market participation (known as liquidity), we will not be able to facilitate foreign currency deposits or withdrawals in or out of your WorldCurrency Access account during that time...."

"...If you intend to make a foreign-currency deposit or withdrawal before year-end, you must do so before December 22nd. Deposits or withdrawals in the new-year will be postponed until January 10, 2000."

Has anyone else heard about this FED recommendation? If all US banks are cooperating on this, we will soon begin to see some interesting movements in international financial markets.

-- An Infrequent Poster (an_infrequent_poster@forexcollapse.com), December 14, 1999

Answers

Yes, I do a lot of foreign transactions with Thomas Cook and they just sent out a letter to me. This letter is toward the bottom at their Y2K website Thomas Cook Y2K (other information for other countries): Y2K MESSAGE FROM THE AMERICAS

In preparation for the approaching Millennium, Thomas Cook has taken every reasonable precaution to test and prepare all critical systems so that we have certification of Y2K readiness. Our priority is to ensure that business continues through the New Year with little to no disruption to our clients, business partners and suppliers.

In addition to systems preparedness, we have established special guidelines for business procedures during the "Millennium" period. We have defined this period as December 15, 1999 to January 15, 2000. Precautionary measures suggested by the Financial Markets Association of Canada and the Federal Reserve Board have been considered in our efforts to reduce any potential risk that may arise. Adjustments to current policies are outlined below.

Forward contracts with maturity dates between December 30, 1999 and January 7, 2000 will not be available.

In compliance with our banking relationships we will request that all outstanding payments be settled in advance of December 31, 1999. Additionally, we will request "good funds" settlement between December 15, 1999 and January 5, 2000.

Lastly, to ensure that your payments are handled without any interruption we encourage you to complete before the middle of December any deals planned or typically completed at yearend.

* Please be aware that as we approach the Millennium period, banking policies may change. We will provide you with updates, as they become available.

In addition to testing existing systems and procedures, we have designed, documented and tested contingency plans. We are making every effort to ensure that the Millennium is uneventful for your international payment and receivable requirements.

Thomas Cook is committed to accommodating your company's foreign exchange needs and we apologize for any inconvenience these adjustments to current policy may cause. Please let us know if we can be of assistance. If you have any questions or require clarification, please do not hesitate to contact your corporate dealer at 1-800-223-9392.

-- Sheri (wncy2k@nccn.net), December 14, 1999.

Help out a financial dunce here:

In compliance with our banking relationships we will request that all outstanding payments be settled in advance of December 31, 1999. Additionally, we will request "good funds" settlement between December 15, 1999 and January 5, 2000.

Does this have anything to do with margin calls? Could a selloff be triggered as people need to "settle up"?

-- Linda (lwmb@psln.com), December 14, 1999.

Am I the only one who feels scream on reading these? What they are proposing is cutting themselves off from the rest of the world. Sure, it's a quiet time of year blah blah blah, but the cost in lost business (not to mention the bank's commissions) is still going to be significant.

I guess they Get It that it's the stakes, not the odds. Just not worth taking the risk, eh?

-- Servant (public_service@yahoo.com), December 14, 1999.

Linda,

No, this is not about margin accounts.

Jerry

-- Jerry B (skeptic76@erols.com), December 14, 1999.

Concern is with compliancy of Toyko Foreign Exchange. London, New York & Toyko are top 3 foreign exhanges...they trade over 1 trillion dollars on a daily basis...

-- mmmm (mmmm@mmmm.com), December 14, 1999.

Banks in Thailand were warned not to do year
end forex transactions.

-- spider (spider0@usa.net), December 14, 1999.

i don't recognize any logic in that last post.

and its most definitely not a lady.

-- mr underhill (prancing@pony.com), December 14, 1999.