ECB-no refi in 1st week of 2000 to avoid Y2K risk

09:13 a.m. Sep 23, 1999 Eastern

FRANKFURT, Sept 23 (Reuters) - The European Central Bank said on Thursday it would not hold its refinancing operation nor have any refi agreements maturing in the first week of 2000 to avoid potential problems linked to the millennium changeover.

The central bank reiterated however it was confident the system of European central banks could cope with a potential rise in demand for liquidity, which might arise at the turn of the year.

``It is considered prudent to eliminate any potential problem that may derive from the maturing and renewal of the main refinancing operation in the first week of the year 2000. Thus no new main refinancing operation will be initiated in the first week of 2000, and no such operation will mature this week.'' the ECB said.

The central bank said in a statement that funds awarded in its refinancing operation on December 21 would have three weeks maturity rather than normal two weeks and would fall due on January 12.

In order to avoid the expiry of two operations on the same day the ECB also extended the maturity of this year's last tender on December 30 to three weeks.

The millennium bug or Y2K problem is a programming glitch which makes older computer read only two digits of a date instead of four and can make some systems read 2000 as 1900 or freeze creating disruptions to an array of computer operated systems.

Concern about the millennium bug could also affect banks' liqudiity as customers may choose to withdraw cash ahead of the year end fearing problems with accessing their accounts during the changeover period.

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-- (M@rket.watching), September 23, 1999