25 February 1999
Y2000: savings in banks will be safe
The Reserve Bank today made public a report (attached), outlining its assessment of the implications of the Year 2000 issue for the banking sector.
The key message of that report is that people's savings in banks will be safe.
Reserve Bank Deputy Governor Rod Carr said: "For the public, the main question is how banks would manage, if people withdraw substantial amounts of cash just before the New Year. The clear answer is that there is no rational reason for people to take out their money, but that if they do the banking sector will cope.
"Many people may withdraw a few hundred dollars beforehand for groceries, in case EFT POS or ATM machines have problems on 1 January. That additional demand can be easily met. The Reserve Bank is increasing its reserves of bank notes, so that at year's end the total value of bank notes in circulation and in reserve will be approximately $6.5 billion, the norm being $4 billion.
"We have also been asked what would happen if people attempt to withdraw all their savings, either because they fear that bank computer records might be lost or that large scale withdrawals by others could cause banks to collapse.
"Neither scenario makes any sense. Banks have multiple back-up copies of all records in case of power failure or the like. The Y2000 problem will not cause any loss of customer records.
"Bank failures also don't fit the facts. Banks fail when their bad debts are so great that their capital is lost or their liquidity runs short. Banks in New Zealand are robust, and even potential debt losses from Y2000 business failures would not be sufficient to threaten bank solvency. The Reserve Bank will ensure adequate liquidity, so large scale withdrawals of cash at worst might lead to temporary shortages of available cash, but would not threaten banks' viability.
"The Reserve Bank's advice to depositors is that come Y2000 the safest place for their money is its normal place - in the bank. That's where my money will be," Dr Carr concluded.
For further information contact
Paul Jackman
Corporate Affairs Manager
Ph 04 471 3671, hm 04 479 5457, pager 026 105 085, E mail Jackmanp@rbnz.govt.nz
