From cash reserves to the quality of their loans, banks endure a lot of poking and prodding from government agencies. That same regulatory oversight has made banks among the most prepared for California’s power crunch, regulators and executives say.
“All banks are required to have contingency plans to deal with natural and other disasters to minimize disruption of their operations,” said Don Pfeiffer, an assistant regional director with the Federal Deposit Insurance Corp. in San Francisco. “Over the past couple of months, we have contacted banks and discussed their plans.”
“It’s a normal part of how we regulate banks,” said Carol Eckert, a spokeswoman for the Federal Reserve Systems.
In Orange County, bank executives say many of the contingency plans they put in place for the year 2000 computer issue are being dusted off for the power crisis.
“We are using a lot of that same Y2K planning to address the situation,” said Roland Ojeda, a regional executive vice president with Sanwa Bank of California.
Because of the extensive planning required by regulators, some bank officials sound resigned to a summer of rolling blackouts.
“We have to be prepared for a number of situations, from weather to tornadoes, hurricane to earthquakes and any acts of nature that could have an impact on our operations. Not only in California, but nationwide,” said Harvey Radin, a Bank of America Corp. spokesman.
Radin called rolling blackouts a relatively small problem compared with other situations banks have to gird for.
“The rolling blackouts affect an area for one to two hours,” he said. “We’ll put signage up at the door to make our customers aware of the situation. We direct customers to another locations and then just reopen.”
Bank of America’s data centers have had generators and backup systems in place for years, according to Radin.
So far, bank officials call power outages a nuisance but worry about what summer will bring.
“Just wait till it gets hot,” said George Kaye, head of Southern California operations for Washington Mutual Inc. “Something is going to happen this summer. I hope they get it resolved pretty soon.”
As with other businesses, banks say not knowing when or where a blackout will occur is what bothers them. Last week, the agency that manages the state’s power grid, the California Independent System Operator, said it expects to issue 24-hour forecasts generally detailing when and where blackouts can be expected.
“The more notification we can get to the blackout, the better off we are,” said Ann Lawrence vice president of bank operations and services administration for Union Bank of California.
Washington Mutual’s Kaye said his company has a command center in Seattle that takes over when a blackout occurs and a system for branches to communicate to each other kicks in. With larger banks, downed branches can direct customers to other unaffected branches.
“We have so many branches, it really helps our business,” Kaye said.
National banks also have the added bonus that many of their processing, data storage and other computer systems aren’t in California.
At Anaheim Hills-based Fremont Investment & Loan, a unit of Santa Monica-based Fremont General Corp., officials a year ago bought a diesel-powered generator that is capable of running the company’s operations.
Anaheim’s city-owned utility isn’t facing the kind of troubles plaguing Southern California Edison. But the city still is subject to rolling blackouts. Murray Zoota, chief executive of Fremont Investment, said he isn’t taking any chances.
“This is serious stuff,” he said. “This company has $4 .5 billion in assets. We need to operate.”
Fremont Investment also has a dial-up system where employees and customers can use portable computers to access the necessary systems to continue business, he said. It also subscribes to a service that will provide trucks of computers and phone service if a disaster were to down the company’s operations. Then there’s an agreement with IBM Corp. to use a computer facility to transact business in case anything happens to Fremont’s operations, Zoota said. n
