Banks stockpile billions to meet millennium panic
HIGH-STREET banks are ordering £8 billion of extra cash in time for December amid fears that the millennium bug will prompt widespread hoarding of money.
The figure is equivalent to a third of the total cash currently in circulation.
The banks know there will be a huge surge in demand over millennium week as customers withdraw unprecedented amounts to pay for parties and presents.
The big question, however, is whether customers withdraw large amounts of money - perhaps even their entire savings - for fear the millennium bug will disable bank computers or wipe out accounts.
In America, the Red Cross is advising people to stockpile money alongside basic supplies of non-perishable food, bottled water and medications in case computer failures cripple the country. American banks are amassing an extra $50 billion (£30.5 billion) to deal with the situation.
The concerns centre on "embedded chips" within the banks' mainframe computers, which record dates as two digits and may therefore confuse the year 2000 with 1900.
In Britain, banks are confident their computer systems will not crash but could still face huge problems caused by nervous account-holders stockpiling cash.
Dr Jane Horton, lecturer in accounting and finance at the London School of Economics, said: "If one person starts taking out money, then more and more will follow. The banks may have problems matching that outflow of cash with their own investments.
"It depends on the solvency of the bank - if 80% of the clients start taking their money out of one of the weaker banks, then it could go bankrupt."
In response, banks are gearing up for a public relations exercise to persuade customers that their money will be safe as the new millennium dawns.
According to NatWest, last year's focus was on ensuring that computer systems were "millennium compliant", whereas this year's goal is to communicate that to the public. The bank sent out 5m leaflets to its customers last month in an attempt to convince them that there was no need to worry about computer crashes on New Year's Day, 2000.
"We know there is a possibility of people making large-scale withdrawals and that is why we are working to reassure people with lots of different messages throughout the year," said a spokesman.
The British Bankers' Association remains confident that all the banking systems will work properly over the millennium celebrations. Like NatWest, however, it is embarking on a mass awareness campaign, to be launched in the next few weeks.
The banks are also asking the police to help with the PR drive. They hope officers will persuade the public that their money is safer left in bank vaults than being withdrawn.
Apacs, the group which oversees Britain's main cheque clearance and payment systems, is conducting monthly surveys asking members of the public how much they intend to withdraw over the festive period.
So far the responses are described as "very comforting", but they remain cautious.
"We know a small proportion of people are