Asia prepares for possible run on banks

Asia prepares for possible run on banks

SINGAPORE (AFP): Asian central banks are backing up their
calls for calm over the year 2000 Y2K computer problem by
ensuring their economies have enough currency to cope with a
possible run on banks ahead of the new year, officials said.

Among economies that have already printed or will print money
to cope with the computer bug are Hong Kong, Taiwan, Australia,
Malaysia and the Philippines, officials said.

Thailand said it will double its cash reserves while the
central Bank of Japan was reported to have set aside 40 trillion
yen (US$374 billion) to cope with unforeseen cash needs in the
transition to the new millennium.

Singapore, Hong Kong, India, South Korea and the Philippines
have also put in place temporary changes to the way they provide
liquidity into their financial systems to deal with Y2K
disruptions, according to Barclays Capital.

The Y2K problem refers to the inability of many older computer
systems to differentiate between 2000 and 1900 as they were
programmed to read the year only in two figures, like 99 for
1999.

It is feared that the bug, unless addressed in time, could
cause computer systems to crash in a host of sectors, including
banking where some customers worry their savings accounts could
go haywire.

By having extra money in their vaults, central banks in Asia
should cope with any panic withdrawal of savings by the public,
officials said.

The Hong Kong Monetary Authority said it would increase money
supply by 150 percent at year's end.

"This is one of the hypothetical scenarios, but even if the
banks' clients withdraw their money, this does not mean that they
want to spend it," said Jasmine Fong, spokeswoman for the
authority.

The central Bank of Japan (BoJ), based on its sufficient
reserves of bank notes, could meet year-end cash demand against
any Y2K-sparked run on banks, said its spokesman, Satoru
Yamadera.

The BoJ's bank note reserves stood at 39 trillion yen ($364
billion) at the end of March, against a total 56 trillion yen in
circulation.

The central Bank of Korea said it had already issued
sufficient banknotes while banks had stored enough money to cope
with any emergency cash shortage.

Taiwan's central bank said that in addition to the current
issuance of some NT$700 billion ($25.02 billion), it has prepared
NT$900 billion to cope with any bank rush.

Officials there said the NT$1.6 trillion should be sufficient
since it was more than the NT$1 trillion issued by the central
bank during the Lunar New Year when cash demand was generally the
highest.

The Reserve Bank of Australia said it was printing more money
and "lengthening the life" of notes that might otherwise be unfit
for circulation.

"We're building up stock such that way so we are in a position
to meet conceivable demand," a bank employee said.

He said the bank's message was for people to treat the turn of
the century as they would a long weekend.

The Central Bank of the Philippines will also print more peso
bills but Governor Rafael Buenaventura asked commercial banks to
provide liquidity if there were massive withdrawals and large-
scale hoarding of cash.

The Monetary Authority of Singapore has been working with the
Board of Commissioners of Currency of Singapore (BCCS) "in the
very unlikely event" of a huge surge in demand for cash.

The BCCS maintains a two-year buffer stock of double the
amount of cash it keeps in reserve for year-end withdrawals.

"We have a lot of stock because of decreased demand on cash
due to the financial crisis," said Napajorn Hemachandra, deputy
secretary-general of the BoT Y2K Command Center.