Liability Fears Make Banks Wary About Statements.

WHILE banks don't want their customers to panic in the days before the end of the century by withdrawing large sums, they're not doing a heck of a lot to prevent it from happening.

Why? One reason is liability.

Banking insiders say there is a good deal of nervousness attached to advance public statements about the Y2K bug. While all banks doing business in California have by now demonstrated to regulators that they are Y2K compliant, there remains a slight risk that something could go wrong, which could expose a bank to massive lawsuits -- especially if it has been making public statements reassuring people that nothing would happen.

Those statements could be seen as false advertising if there is a problem, even if it's one over which the bank has no control. For example, a widespread power outage would shut down automated teller machines, which wouldn't be the bank's fault. But if the bank had been assuring people that it would have no Y2K-related problems, such an outage could expose the bank to liability.

"We can't make unconditional guarantees," said Sara Moorehead, Y2K communications coordinator with Washington Mutual Bank. "We're never saying, 'There will be no disruptions.' We're just making a real clear point that we've done everything possible."

Despite the liability issues, banks do very much want to assuage their customers' fears. The result is a carefully orchestrated campaign, usually fairly limited in scope, in which the bank's marketing department -- and its lawyers -- work closely to determine what they can say without getting into trouble.

"At a certain point, avoiding a loss of consumer confidence becomes more important than avoiding the potential litigation that could happen if something goes wrong," said John Stafford, spokesman for the California Bankers Association.

Most banks have some kind of communications program in place to inform their customers that the bank's computer systems are up to snuff and there's no need to worry about the Y2K glitch shutting everything down. But at most banks in California, these programs are limited to things like ATM receipts with a blurb about Y2K compliance, statement stuffers, and an occasional sign inside the branches. Only a handful are mounting extensive advertising or public relations campaigns.

Two of the banks in L.A. doing a higher-than-average level of Y2K marketing are Union Bank of California and Bank of America.

Union Bank was one of the first to announce that it is Y2K compliant. It also has extensive signage within its branches with the slogan "Y2K OK," and it launched a limited newspaper ad campaign last summer about its Y2K preparedness.

Bank of America is one of the few other banks to launch a Y2K ad campaign, which is scheduled to launch this week. The ads, to appear exclusively in newspapers, tell customers that they won't have anything to worry about from their bank on New Year's Day.

"Basically, all these messages were crafted in conjunction with our legal department," said BofA spokeswoman Linda Mueller. "We're comfortable with these messages. We think it's important to communicate, and we've developed these messages as a team."

Meanwhile, two other institutions with a giant presence in Los Angeles, Wells Fargo Bank and Washington Mutual, have made relatively minor efforts to inform their customers about Y2K issues, such as the standard ATM messages, statement stuffers and information on Y2K posted on their Web sites.

Liability isn't the only concern that is preventing banking institutions from mounting extensive Y2K-related marketing campaigns. Many institutions have fairly small marketing budgets to begin with and do little advertising. Others feel that federal regulators are doing an adequate job of informing the public on their own.

"Most of the communication on Y2K has come from the Fed," Stafford said. "Banks are a little leery of blowing their horns too loudly in this area. The regulators make a much more credible source."

At Washington Mutual, marketing executives say advertising is simply an inappropriate vehicle for getting the word out about Y2K. They believe that the best strategy is to concentrate on their own customers through statement stuffers and in-branch signs and brochures. The only point of running ads, which reach the general public rather than existing customers, would be to try to get new business -- and that would be inappropriate given the nature of the problem.

"We don't view this event as something to use to try to solicit customers from other banks," Moorehead said.

Meanwhile, a handful of small and medium-sized banks in California have taken a novel approach to Y2K marketing by announcing they will open their branches on New Year's Day -- even though it's normally a bank holiday, and this year it falls on a Saturday. California Federal Bank is the largest institution to make such an announcement.

Extensive marketing or not, consumer fears about Y2K do appear to be subsiding. A Gallup poll in October sponsored by Star Systems Inc. found that 86 percent of ATM-card holders are confident that their ATMs will work on New Year's Day. In April, 79 percent expressed confidence.

"All the communication the financial industry has been doing throughout the year has obviously done its job," said Star Systems Executive Vice President Nikki Waters.