Bank prepares for year 2000 cash crisis
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Your support makes all the difference.THE BANK of England plans to provide emergency help to the banking system in the run-up to 1 January 2000 to cope with an expected surge in demand from the general public for cash.
Demand for banknotes tends to rise anyway ahead of the Christmas holiday. However, it is feared that next year people will withdraw even larger sums to tide them over because of the fear that the millennium bug could bring cash-less payment systems to a halt.
According to the latest report by the Bank of England on the readiness of the UK financial sector for the year 2000 problem, banks and financial institutions are better prepared than other parts of the economy to ensure their computer systems can cope. They are also in better shape than banks abroad.
However, the Bank of England and the Financial Services Authority are each drawing up contingency plans to provide emergency liquidity. The aim is to prevent institutions failing either because of counter-parties running into computer difficulties or settlement systems breaking down.
The Bank has identified subsidiary risks of a run on companies, or even countries, which are thought to be inadequately prepared. It is also feared that investors might back way altogether from markets rather than risk being caught out by trading and settlement systems failing.
"There is no doubt that the date change will be a period of high operational risk, and market operators will be seeking to keep their exposures to a minimum," the Bank of England report said.
Last week KLM, the Dutch airline, warned it was ready to ground flights rather than risk passenger safety, because it feared airports and air traffic control systems were not up to scratch.
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