This is a very informative article on banks and Y2K. A must read. It's from the Denver Business Journal.

http://www.amcity.com/denver/stories/1999/03/08/newscolumn4.html

Silence is deafening as banks address Y2K

Aldo Svaldi

Liability worries have left bankers and regulators afraid to express strong confidence in their tackling of the Year 2000 problem.

Their silence sends a mixed message, a potentially dangerous one, from an industry that probably has done more than any other to get ready.

The Federal Reserve is requiring in-depth testing by more than 7,000 banks. A recent U.S. Senate report listed the financial sector as one of the most prepared for Y2K.

Discussions at the Colorado Banker's Association Management Conference last week expressed faith in how banks have handled the technical side of the problem, but worries over a public crisis in confidence.

The Federal Reserve will add an extra $50 billion or $500 per household of currency to the system through October to anticipate the extra cash people will want "just in case."

That is in addition to the $150 billion already available within the Federal Reserve system, said Carl Gambs, president of the Denver Branch of the Federal Reserve Bank. It doesn't count the additional cash the Fed could bring out in the calendar fourth quarter.

Assume the Federal Reserve can provide $2,000 worth of cash per household, and then add a little more available in bank vaults.

Many families in America living paycheck to paycheck aren't that liquid to begin with and only a small segment of the population is expected to cash out entirely.

Barring a mass panic, the Federal Reserve can provide the liquidity banks need. But there aren't enough armored cars to deliver all that cash in the last two weeks of December.

Banks will need to gradually build their stockpiles and swallow the costs of carrying so much unused inventory. For bankers who know they are ready, that could seem a hard cost to justify.

One way around that is to pay customers making large withdrawals with cashier's checks or wire transfers, and the Colorado Bankers Association is researching the legality of doing just that.

Most people assume they have the right to receive currency on demand. But banks have a legal right to offer other forms of payment, said Don Childears, CBA president.

Hiding behind that legal defense may not be the smartest move. A sure way to strike panic in the heart of the public would be to issue cashier's checks or limit automated teller machines to $40 withdrawals.

What the public needs from the banking sector on Y2K is courage. Courage to tackle the problem, first of all, whatever the cost, and courage to stand by that effort. It must communicate the unequivocal message that it is ready and offer the proof. Confidence will follow.

When the public asks "show me the money," bankers need to be able to do it. No ifs, ands or buts -- only dollars and cents.

[snip]

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-- Kevin (mixesmusic@worldnet.att.net), March 09, 1999

Answers

Especially note this quote:

[snip]

One way around that is to pay customers making large withdrawals with cashier's checks or wire transfers, and the Colorado Bankers Association is researching the legality of doing just that.

Most people assume they have the right to receive currency on demand. But banks have a legal right to offer other forms of payment, said Don Childears, CBA president.

Hiding behind that legal defense may not be the smartest move. A sure way to strike panic in the heart of the public would be to issue cashier's checks or limit automated teller machines to $40 withdrawals.

[snip]

-- Kevin (mixesmusic@worldnet.att.net), March 09, 1999.

Thanks Kevin for all your hard work in finding and posting these gems of information. I don't plan on being one of those irrate people standing in line at the bank just to get a measley $40.00. A lot of people are going to be found wanting and kicking themselves for not paying attention. We haven't seen anything yet, I wouldn't want to be a bank teller WTSHTF that's for sure!

-- bardou (bardou@baloney.com), March 09, 1999.

All bets are off if someone is stupid enough to wait until December to get their cash straight, but until then, if a bank insists that it will give depositors cashier's checks instead of greenbacks, then it's all over as far as I'm concerned. I consider this story to be quite troubling. Especially the part about getting the legal opinion on the propriety of paying off with cashier's checks.

Of course, I'd like to have some indication of what they mean by "large withdrawals." I'd expect a bank to need some advance notice if one person wants to take out tens of thousands of dollars in cash in one day.

-- Puddintame (dit@dot.com), March 09, 1999.

Kevin; Many thanks for this disconcerting banking post. We are all searching for and need to know more of reality. You are one of our best scouts!

-- Watchful (seethesea@msn.com), March 09, 1999.

A post y2k bank heist scene: A guy comes into the bank, pulls out a sawed off shotgun and points it at the teller and demands: "My Money or Your Life"

-- jeanne (jeanne@hurry.now), March 09, 1999.

Kevin,

Outstannding post!!!!, both myself and my wife work in banks, She sees this situation more because shes in retail, where people are already asking "How are you set for Y2k?" . Your right in that we in the banking industry have dealt with the technical issues and are now faced with the Public relations challenge. Really not enough is being done on this front. If people have confidence that thier bank is ready, problems will be greatly reduced. Many banks have have issued very strong statements concerning there Y2k readiness, but unfortunately it either doesnt get to or is not understood, by the run of the mill customer. People need to hear this from the tellers on the front line, the familiar face they see every day. Many tellers are totally in the dark as to what thier companies status is. In addition to solving whatever outstanding issues they may have technically they also need to send every teller they have to at least a one day training course on how to adress people questions concerning this topic. Its a small thing really but will go a long way to preventing the much feared "run on the banks"

Beyond the retail banking industry , middle class investors also have many questions, concerning thier investments for these people the following link may prove useful.

http://www.sec.gov/news/y2kdb

this link contains a database of the securities industries current reports to the SEC on thier Y2k readiness. Investment companies, broker/dealers , transfer agents and mutual fund companies can be queried by name.

Lee

-- nyc (nycnyc@hotmail.com), March 09, 1999.

So Lee, as a banking insider what is yours and your wife's take on banking compliance and readiness. Is your bank done? What kind of testing has it done? Give us the Scoop!

-- CP (cmatp@aol.com), March 09, 1999.

I think this is SEC search link that Lee was trying to give us:

http://www.sec.gov/news/y2k/y2kreps.htm

-- Kevin (mixesmusic@worldnet.att.net), March 09, 1999.

Or more specifically, this:

http://www.sec.gov/news/y2k/picky2kr.htm

-- Kevin (mixesmusic@worldnet.att.net), March 09, 1999.

nyc: assuming your bank or mine is compliant, how will they accept data from a bank that is not compliant, as will be the case with most of the banks in the world, if we are to believe the numerous studies of y2k readiness in the rest of the world? What good does it do to have some or even most banks completely compliant if they do not know whether they can accept data from other banks or not? Without a reliably working system of banks, what good are they?

-- cody varian (cody@y2ksurvive.com), March 09, 1999.

And this from today's www.news.com:

Ba nks not yet ready for Y2K problems

-- Shimrod (shimrod@lycosmail.com), March 10, 1999.

The scoop on banks as I see it are this.

Y2k will have a similar effect on the banking industry as the recent economic crisis in Maylaysia, Hong Kong, Brazil and Russia did. Those banks that exposed themselves to the risks will suffer, those that minimize the risks will profit.

I personally see the banks which experience Severe Y2k problems failing rather quickly, while the bankswhich experience few Y2k problems prospering.People will move thier money to where they feel comfortable. Smart banks will see stocks rise, foolish banks will see stock plumment and fail or become takeover target. We call it business as usual in the banking business :)

My bank personally is in good shape for Y2k. I can say this from experience of having overseen a nice chunk of the testing myself. We have a vendor or two who are still struggling a bit with minor problems. but nothing that the common man will ever notice. Were certified (by ourselves I might add, ass their are only guidelines for this process, now formal agency that does it) that all our internal systems, both retail and investment as well as all our hardware is fully Y2k compliant. All thats left this year is to do the external testing. Thats a coordinated effort , known as the Wall Street street test.and is currently under way. I dont worry about my ATM not working.

My wife works for a much smaller local bank. who as I said isnt doing a n especially good job of informing the public as to thier Y2k status. She has seen several system changes take effect over the last few months however, birthdates going from 2 digits to 4 for example. Her bank is much more retail oriented than mine is , so information disclosure to the public is all the more critical, I worry alot more for her ATM and stock price than I do for mine.

As far as the way in which banks talk to each other go, there are several methods. Believe it or not, many transactions are still faxed or sent by phoneso that will be an issue for the phone utilities. As far as eltronic funds transfers go there are two mechanisms Im aware of, the first is a proprietary network known as SWIFT. Its a communication standard, between participating banks. This standard is now using 4 digit dates . Participating banks of course also have to be compliant. but to verify a SWIFT message these systems also have to recognize the 4 digit dates, so those systems achieve at least that level of compliance by default. The other mechanism of funds transfer is the Fedwire, which i regret to say i know squat about, technically.

Hope this helps

nyc

-- nyc (nycnyc@hotmail.com), March 11, 1999.

Hmm i just noticed a typo here.

2 to 4 digit dates - should read - 2 to 4 digit years

and

Swift standard uses 4 digit years (8 , not 4 digit dates)

Sorry for the confusion this may have caused.

nyc

-- nyc (nycnyc@hotmail.com), March 14, 1999.