Academic journal article ABA Banking Journal

With Y2K, Silence Is Deadly

Academic journal article ABA Banking Journal

With Y2K, Silence Is Deadly

Article excerpt

We're 13 months away from either the biggest event or the biggest nonevent in modern history. Most likely the actual effects of the year 2000 problem will fall somewhere between those extremes--closer to nonevent, let's hope.

Most of the "Y2K" focus to date has been on making the necessary system fixes. But there's another part of this issue that could prove tougher than the technology. And that's the psychology of the event--the potential for a stadium stampede in the arena of public opinion.

We've heard from bankers that some customers are already considering how much cash to withdraw--and when--in anticipation of a year 2000 shutdown of normal sources of cash.

One banker reports that an elderly woman told a teller that she was going to withdraw $10,000 because of the "millennium bug." But it's not just widows or--on the opposite end of the spectrum--survivalists who are considering such steps. A personal guide to Y2K preparedness appearing on the Web site of a respected technology research company suggests having two weeks of pay as an appropriate set-aside. One of our staffers, when asked by a friend if he should take out $1,000, said that was probably a good idea. That response, repeated in print, provoked the letter that appears on page 20.

Unlike the person wanting to withdraw $10,000, the staffer's response was not questioning the viability of FDIC insurance, but simply the ability to pay bills and buy food should cash not be available. It's a prudent thing for a person to consider under the circumstances, like setting aside extra batteries when a severe storm is forecast.

The problem, of course, is that even the biggest storms don't affect the entire country, much less the world, the way the Y2K issue does. If, as the letter writer observed, everyone took $1,000 from their checking account next December, it would lead to huge problems.

Banks, their regulators, and suppliers clearly are taking every step possible to be sure their systems do work. The issue is one of instilling confidence in the public about being able to transact business come the millennium; that extraordinary precautions are not necessary, and could be ill-advised.

Community banks are well positioned to do this. We spoke about the issue with Nicki Brown, president and CEO, Wilton Bank, Wilton, Conn. She says it's important to train all customer contact people to be able to explain why cash hoarding is not necessary. It was Brown who heard of the woman planning to withdraw $10,000, and she told the staff to call her when the woman comes in next, "so I can explain to her why it's not necessary and not safe to do that. …

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