U.S. Banks Ready at the Switch for Y2K

After spending $10 billion to ensure that New Year’s Eve will be a nonevent for their computer systems, U.S. banks are nevertheless embarking on the most exhaustive and, in many ways, imaginative disaster-preparedness effort in their history.

San Francisco-based Wells Fargo Bank stands ready to deploy a small fleet of mobile automated teller machines--housed in specially fitted vans--in the event they are needed.

U.S. Bancorp plans to switch its Minneapolis headquarters to backup power generators two hours before midnight, just in case electricity lines go down.

Even mid-size Newport Beach-based Downey Financial Corp. has two standby helicopters ready to ferry people and supplies wherever needed.

“The process we are going through is similar to what we do to prepare for an earthquake or hurricane,” said John Conover, who is heading Bank of America’s Y2K preparations. “But here we have the advantage of knowing exactly when the event is going to happen, so we can prepare more.”

Banks remain highly confident that their systems are Y2K-ready and that none of these contingency plans will be needed. They say the precautions are designed to comfort customers, not alarm them. And in many cases, federal regulators require the meticulous preparations.

Bankers predict this unprecedented behind-the-scenes campaign will culminate in the dullest, most anticlimactic New Year’s Eve they’ve ever celebrated.

“We think it’s going to be a yawner,” said Lee Kirkpatrick, senior vice president at Union Bank of California and one of many bank executives who will be working when midnight strikes. “We’ve spent $50 million to make sure that it’s going to be business as usual that weekend. But we realize that everybody’s eyes are going to be on us. So we want to make sure we are ready for anything.”

The American Bankers Assn. estimates that the entire industry will spend about $10 billion to get ready for 2000, mostly on updating, replacing and testing computer systems to ensure they don’t fail after the date change.

The work has paid off, according to the Federal Deposit Insurance Corp., which says 99.9% of federally insured institutions--all but one in Florida--are ready for Y2K.

But as Dec. 31 nears, banks are turning their attention to making sure they survive the tension-filled weekend without a hitch.

“We are extremely prepared, but there is still a tremendous amount of pressure,” said Liane Wilson, vice chairwoman of corporate technology at Seattle-based Washington Mutual, the nation’s largest thrift.

Banks have spent months--in some cases years--writing and rewriting contingency plans, trying to anticipate every conceivable disruption. They’ve made sure that branches are well-stocked with cash in case customers demand it, though officials say they have not noticed any unusual withdrawal activity.

Employees on Duty Though Branches Shut

Though most California bank branches will remain closed during the holiday weekend, thousands of bank employees will be working. San Francisco-based Union Bank expects to have about 500 people on rotating shifts 24 hours a day.

To prepare their employees for the main event, Bank of America, Wells Fargo and others have staged several dress rehearsals of Y2K disasters, ranging from cash shortages to riots. In some cases, these exercises lasted for two days.

“We sprung surprise scenarios on some of our employees to heighten awareness and see how people react,” said Kay Evans, the Y2K event-planning manager for Wells Fargo.

Once the weekend arrives, most of the workers will be testing and monitoring computer systems. In addition to possible Y2K glitches, banks are mindful of the fact that Dec. 31 is already one of the busiest nights of the year for bank computer processing because the systems must conduct additional calculations of year-end statistics for such things as accrued interest and average balances.

“First, the computers have to do the daily processing, then the weekly, then the monthly and quarterly,” Wilson said. “But we’ve already simulated this with the computers, and there were no problems.”

The volume of transactions also is expected to be higher than normal at the end of the year as customers withdraw extra cash for the holiday weekend, or out of concern about Y2K problems.

To oversee the operations, banks have set up temporary command centers--backed up by emergency power generators--at their headquarters or at key data centers. There, top managers will monitor potential problems and communicate with regulators. Wells Fargo even has a backup command center at an undisclosed location in the Southwest, in case something goes wrong at its primary center in the Bay Area.

Joining banks at these command posts will be on-site federal regulators from the Federal Reserve Bank, Office of the Comptroller of the Currency and other agencies. Smaller institutions have prearranged telephone appointments to update regulators on potential problems.

Several banks plan to beef up security during the weekend because of concerns that some of the giant outdoor New Year’s celebrations might get out of hand.

Union Bank plans to beef up nighttime security at some branches. Wells Fargo will have extra guards on call. Downey Savings is stocking its branches with emergency supplies such as flashlights, cell phones, radios and lanterns.

So far, California Federal Bank is the state’s only large institution that plans to open its branches on Saturday, which the San Francisco-based thrift hopes will demonstrate its confidence that it is Y2K-ready. About 100 CalFed branches will open from 9 a.m. to 1 p.m. on Jan. 1.

“For those customers who are anxious, this gives us the opportunity to show them that everything is working,” said Bob Trujillo, who is in charge of CalFed’s network of branches.

Most other banks have no plans to open until the following Monday. Many said they will use the holiday weekend to inspect branches, dispatching workers to flip light switches, test elevators and flush toilets.

Testing ATMs in Other Time Zones

However, customer-service centers at many banks will be fully staffed, in anticipation that customers might want to call to verify their account information after Dec. 31. Washington Mutual is beefing up staffing at one of its two call centers. Downey upgraded its automated telephone-inquiry system to handle more calls.

ATMs are receiving the most scrutiny because they will be the public’s first test of the banking system. Officials are making sure that ATMs are well-stocked with cash, paper rolls and ribbons. Computers will closely monitor withdrawals to ensure that machines don’t run out of cash.

“We are comfortable that our machines will be up and running,” Trujillo said. “We’re more worried about a receipt jamming or a card getting stuck, which would cause an ATM to shut down. We don’t want people to automatically blame whatever happens on Y2K.”

A year ago, European banks experienced a similar problem with the euro currency conversion. So many Europeans rushed to ATMs to check their balances that machines shut down--not because they ran out of cash or because systems failed, but because the machines ran out of paper for receipts.

Power outages are another problem that banks say they can do little about.

Because of the world’s different time zones, banks in California are hoping to get a head start in testing their ATM systems.

Washington Mutual has arranged to have someone in Australia use a Washington Mutual ATM card shortly after midnight Dec. 31, when it will still be early morning in California. Union Bank will do the same thing with an employee in Guam. Downey Savings has no foreign offices, but it will send employees to its California ATMs shortly after midnight to test them out.

The high alert at most banks won’t end with the weekend. In fact, the night of Jan. 3, the next Monday, will be another crucial test for banks because that’s when computers start processing--for the first time in the new year--transactions from that day and from the weekend.

“Monday actually involves more activity,” said Evans of Wells Fargo. She said the bank will continue to do 24-hour-a-day monitoring of its systems until at least Jan. 10.