US Hurricanes Expose Vulnerabilities of Bank Infrastructure
SputnikNews.com
16.09.2017
Extreme conditions, including natural and man-made disasters, might cause disruptions to the work of ATMs and bank branches, as well as bank card terminals at retail locations, rendering consumers in the affected areas unable to acquire the cash they need to survive.
Kristian Rouz – In the wake of two massive hurricanes pummeling the US, the sustainability of banking operations under extreme circumstances has become a major concern for the sector. As most advanced economies are gradually moving toward a ‘cashless society’ model, with bank transactions and various payment systems gaining a dominant position in the exchange of goods and services, unpredictable disruptions in such transactions might cause chaos, and hinder or halt consumer activity altogether.
The virtual flow of money liquidity through the veins of the market economy might face severe disruptions when key elements of bank infrastructure go offline, as demonstrated by the devastating effects of hurricane ‘Irma’. In Florida, consumer activity was paralyzed for days, as the cash savings of the local consumers have proven insufficient to help withstand or offset the storm conditions.
According to the Federal Reserve, the US central bank had to allocate an additional $2.9 bln in cash to commercial banks in Florida ahead of the hurricane’s onslaught on the state. Two Fed branches in the state were working 24/7 trying to meet the demand for cash, as local residents were anticipating out-of-order cash dispensers and closed commercial bank branches due to the storm.
Fed offices in Miami and Jacksonville, FL, increased their cash shipments to the local commercial bank and credit union branches twofold, as the officials were preparing their emergency response to the hurricane, trying to offset the liquidity squeeze in the state expected ahead of the storm.
They were proven right, as people headed for the local bank branches and cash dispensers, reasonably thinking the hurricane would render their plastic bankcards useless.
It did.
“It absolutely doubled our normal day-to-day operations,” Mary Gelpi of the Fed regional cash function office in New Orleans said.
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