Banking is a system, and this system is now facing its greatest threat in history, namely, a dual domino effect: (1) bad data imported from other banks' computers; (2) bank runs by frightened depositors. The threat of the first will lead to the second.
The unsolvable question now facing all banks is this: How can a compliant bank (if any) protect itself from noncompliant banks and still remain inside the banking system? I believe there is only a negative answer to this question: "It can't." But this answer threatens the survival of the modern economy, and possibly modern civilization if the means of payment breaks down and nothing replaces it fast enough. The world is facing bankruptcy (bank + rupture).
THE GUARDIAN, England's liberal newspaper, ran a story on the fear of English bankers regarding other banks: "Don’t bank on survival." The title of the article is better than the article itself. Each banker is asking himself this question: "What good will it do to spend a fortune to get my bank compliant if other institutions are not going to spend the money to get compliant? In short, will my bank go down with the ship?" The obvious answer is "yes." It is an unpleasant answer, and not just for bankers. So, no one except me is announcing the answer. For this, I am dismissed as an extremist. But my critics never get around to showing how there can be any other answer to the question. If there is another answer, it's time for someone to propose it and prove it.
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Banks are among the heaviest users of information technology, and because of this they’ve been among the first to address the year 2000 problem. But British banks are now worried they will be dragged into a millennium mess by their colleagues overseas, their customers and the telecoms companies who handle their international business.
According to a survey earlier this year by the British Bankers’ Association (BBA), British banks are meeting the association’s timetable for action. But banks do a large proportion of their business among themselves and recognise that if one falls, Barings-like, it threatens them all. This is why bankers in the UK are now looking with concern at their colleagues across the Channel. There they have another issue screaming for their attention — the imminent arrival of the euro.
The countries furthest ahead in preparing for European Monetary Union are furthest behind in addressing the year 2000 problem and vice versa, according to Ian Hugo, editor of Millennium Watch, a newsletter sponsored by the UK Government’s Taskforce 2000. . . .
UK banks are not only worried about their European colleagues, but also about how their customers are addressing the millennium bug.
The signs are not good. . . .
At least the banks can get to grips with their customers. A more difficult concern to deal with is telecommunications, especially the global links necessary to support international trading, settlement, credit card transactions and so on.