Community banks say they will be ready for the year-2000 date change but are not so sure about their customers, according to a new Grant Thornton LLP survey.

In the firm's sixth annual survey, 98% of 815 community bankers responding said they are confident their banks' computer systems will not malfunction next Jan. 1. In case of any glitch, 90% of the banks said they have board-approved contingency plans.

The survey rebutted earlier data and media reports suggesting that smaller banks were less prepared for the date change than big ones, said Diane M. Casey, managing partner of financial services at Grant Thornton.

"I think this should give the public very strong confidence," she said. "Community banks have received more negative press than they deserved."

To help reassure customers, regulators are expected to issue guidelines this week outlining steps that banks can take to demonstrate year-2000 readiness.

Community banks have come a long way since last year's survey. About three-quarters of the bankers in last year's survey said they planned to spend less than $10,000 on the problem; only 44% said they had begun testing their vaults and security systems; and 36% said they had a contingency plan.

Though the 1999 survey did not ask bankers about year-2000 spending, it did find that 98% of the banks said they would be finished testing their computer systems by the regulators' June 30 deadline.

"After last year, we were a little concerned," Ms. Casey said, "but this does lay to rest the notion that community banks are behind."

Small banks may be comfortable with their own readiness for 2000, but they are not as sure about their customers. Only 36% said they were confident that their customers will be prepared for the date change.

Some people, for example, may not be able to gain access to their financial records if they were kept in an outdated personal computer, Ms. Casey said.

For large commercial customers, the problems could be more serious. Computer chips that do not properly recognize the 2000 date may lock up production systems and paralyze businesses, she said.

For that reason, bankers are trying to raise customers' awareness. Roger Moler, chief executive officer of Brookville (Ohio) National Bank, said he has given speeches at local Rotary club meetings about year-2000 computer problems. Bank representatives have also met with commercial loan customers and sent out brochures to all customers describing the problem.

"We're trying to be proactive," said Mr. Moler, who participated in the Grant Thornton survey.

Not that banks can force customers to act.

"You can only do so much," Ms. Casey said. "You can't control the customers."

Mr. Moler said another concern is liquidity. Just before Jan. 1, 1999, depositors at the $68 million-asset bank withdrew an additional $200,000 after a religious group suggested that the funds may not be safe.

To prepare for 2000, Mr. Moler said, the bank will increase its cash on hand by 14%, and bank employees will remind customers making large withdrawals that their deposits are insured by the Federal Deposit Insurance Corp.

Other bankers who answered the survey also plan to boost their banks' liquidity in the fourth quarter. About one-quarter of the banks said they will need at least 20% more currency on hand. And 57% of the banks said they would need from 6% to 20% extra cash.

Grant Thornton's complete survey, which also details small banks' spending on technology and other strategic assets, will be released March 15.

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