Community bankers are being urged to bulk up on cash this year to prepare for nervous customers who may be making larger-than-normal withdrawals as the millennium approaches.

"The Fed is advising that you complete your buildup of cash reserves by Thanksgiving," said Kenneth A. Guenther, executive vice president of the Independent Community Bankers of America.

Mr. Guenther, who spoke to community bankers last week at a conference sponsored by American Banker, warned executives not to put off their cash requests until the last minute. "Be aware that armored carriers will have little excess capacity in late November and December," he said.

Three weeks ago the Federal Reserve Board announced steps to give banks additional access to cash in the event that year-2000 fears generate a run on automated teller machines and teller windows.

Recognizing that some bank customers plan to hoard cash in case computer systems fail on Jan. 1, 2000, the Fed is planning to have at least $200 billion in its vaults to satisfy end-of-year cash needs, about $50 billion more than normal.

The agency is also setting up more than 100 special cash inventory sites to back up the Federal Reserve banks and branches around the country.

"These locations would serve remote banks in areas where it would normally take more than a day to get cash routed from the Federal Reserve branches," a Fed spokeswoman said. "The idea is to have cash available within the same day."

Robert Dickson, chief executive of $1.5 billion-asset Frontier Bank in Everett, Wash., said his staff is already assessing the bank's yearend cash needs.

"They have made an outreach to some of our largest potential cash users, such as credit unions that do business with us," he said.

Though year-2000 fears are overblown, he said, a lot of people "listen to the talk shows, and they are hearing that ATMs will be frozen and account records will be fouled up."

Milton Branum, chief executive officer of Bank of Sullivan, a $180 million-asset institution in Sullivan, Mo., said he will consider tapping the Federal Home Loan Bank for an additional $2 million. "We have heard that the average household will want an additional $400 in cash," he said.

But Mr. Branum doesn't place much stock in the projections. "Everyone has advice on what kind of numbers you should use to project your extra cash needs," he said. "But none of it is based on fact."

Subscribe Now

Access to authoritative analysis and perspective and our data-driven report series.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.