Advance planning key to Y2K issues

BY PJ HELLER | WASHINGTON | April 5, 1999


WASHINGTON (April 5, 1999) -- While financial institutions are publicly

predicting few if any problems when the clock strikes midnight on Dec. 31,

1999, they are nevertheless taking unprecedented precautions to deal with

possible Y2K problems.

One of the biggest fears of banks, thrifts and credit unions is a run on

their institutions for cash ahead of the turn of the century by a public

panicked by fears of year 2000 computer glitches.

To prevent a money shortage in the event that people make a run on

financial institutions and automated teller machines, the Federal Reserve

has ordered an additional $50 billion of new currency to be ready to be put

into circulation. Other contingency plans are in the wings.

"While we do not expect currency demand to increase dramatically, the

Federal Reserve believes it is important for the public to have confidence

in the availability of cash in advance of the rollover," Chairman Alan

Greenspan told a Senate hearing in February. "As a result of these kinds of

activities, I can say with assurance that the Federal Reserve will be ready

in both its operations and planning activities for the millennium rollover."

"We don't know what will happen in the future," noted Carolyn Jordan,

executive director of the National Credit Union Administration in a speech

to a trade group earlier this year. "We don't think it's going to be

horrendous."

Nevertheless, she said, NCUA was preparing for the most catastrophic

scenario "no matter how remote we feel it is."

That preparation includes holding planning sessions with the Federal

Reserve, corporate credit unions and others to develop backup plans "in

case everything we ever dreamed of happens," she said.

Faith-based and relief organizations expect only minimal financial impact

from the millennium bug, although there are some groups that are

anticipating Armageddon.

"We're in pretty good shape," reported Joanne Rendall, director of the

Office of Finance and administrative services for Church World Service.

She said testing of hardware and software with the date moved to the year

2000 did not create any problems.

Many older computers were programmed to recognize only the last two digits

of a year. The fear is that these computer systems will fail or malfunction

because they will not recognize 00 as a new year -- or may think the year is

1900.

"We have not experienced any problems," Rendall said of the testing at CWS.

"We feel pretty good about where we're at. We'll be able to continue to

provide needed services."

The Rev. Dacia Reid, director of the UUY2K Project, a community ministry

dedicated to raising awareness about the potential impacts of the year 2000

problem, said the key for faith-based groups is advanced planning.

"The dangers of storms, floods, earthquake and nuclear war remain and now

we've added the high probability of Y2K disruption of basic services which

looms just around the corner," said Reid, formerly the minister at the

Unitarian Universalist Church in Brockton, Mass.

"Churches frequently become resource centers when a community encounters a

crisis," she said. "The difference between unexpected weather and Y2K is

that we have a lot of advance warning and know the date on which most of

the crisis will arrive. Advance awareness means that we have more

opportunity than usual to plan ahead and work within the context of the

towns and cities in which our churches are located to develop contingency

plans."

Peggy Case, director of the Terrebonne Readiness and Assistance Coalition

(TRAC) in Louisiana and a disaster resource consultant for CWS, said that

while she expected financial institutions to experience Y2K problems, she

felt they would have little impact on organizations like hers when it came

to accessing funds.

"Most non-profits, especially on our scale, don't have a lot of contingency

funds sitting there (in banks)," she said.

Case said TRAC was focusing on preparations for what could be a busy

hurricane season this year and had paid little attention to Y2K issues.

"We're just busy getting ready for an above-average (hurricane) storm

season," she said. "The probability of landfall is really high for the

coastal areas."

Rendall said other groups with whom she has spoken also are focusing on

their core missions rather than Y2K.

"I wouldn't say it's a non-issue but it hasn't been a high priority issue

at this point," she said.

For banks and credit unions, however, dealing with Y2K issues has been

nearly an all-consuming project. Banks have reportedly spent billions of

dollars to head off any computer problems.

"Banks are preparing in a similar fashion as they would for a fire,

hurricane, flood or other potential crisis," the American Bankers

Association said. "They have backup plans, which include generators to keep

electricity flowing and alternative locations, so that it will be business

as usual for all of their customers."

Among the plans being discussed by some credit union officials is to remain

open on Saturday, Jan. 1, to assuage any member fears about availability of

funds.

Other suggestions include filling ATMs with $100 bills so members can have

ready access to larger amounts of cash; recommending a dollar amount to

withdraw to members concerned about Y2K, and mailing month-end statements

for December a week or so early so members will have recourse in the event

of a computer glitch when the year 2000 arrives.

Bill Cheney, president and chief executive officer at Xerox Federal Credit

Union, said his institution, like some other credit unions, was not

allowing employees to take vacation time from mid-December through

mid-January in order to have a full staff available to deal with any

unexpected Y2K problems.

Reid, the Unitarian Universalist minister, said that dispute assurances

from different segments, people should expect problems.

"I am convinced that we will encounter, at the very least, disruptions of

inconvenience," Reid said. "We will weather these events to the extent that

we prepare for some stormy weather.

"Lifeboats, life preservers, helmets, automobile safety inspections,

seatbelts - they're all things we advocate," she added. "Let's not ignore

our basic safety in the hope, trust, expectation that all the Y2K problems

will, or should, be fixed. Accidents happen -- even when you're a careful

driver."

Posted April 5, 1999


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