Deutsche Bank hit by day-long computer shutdown

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Happened on Dec. 1. Can you say look-ahead? This is not making me feel warm and fuzzy:

http://www.ft.com/hippocampus/q2f8566.htm

-- Thinman (thinman38@hotmail.com), December 07, 1999

Answers

Here are some rough numbers to help put this in perspective: the news article said the bank processes 100,000 transactions per hour, and it was down for 10 hours. That's a million transactions, the dollar magnitude of which was (obviously) not disclosed. If we assume the average transaction was US$1,000 then we're talking about US$1 billion.

It the transactions were all taken care of the next day, as the article says they were, then the bank effectively was in a position of paying interest on $1 billion overnight. At a nominal interest rate of 5%, that works out (according to my calculator) to $136,986.

Obviously, the number could be substantially higher or lower, depending on the assumptions one makes about interest rates, average size of each financial transaction, presence or absence of government-imposed penalties and fines, etc.

Ed

-- Ed Yourdon (ed@yourdon.com), December 07, 1999.


Rented a truck from home depot at the end of Nov. No problem with credit card exp. date 12/31/99.

Dec. 5, I tried to rent the same truck at the same home depot, with the same credit card. Computer refused to accept the card.

I have excellent credit,and no balance due on the card. The woman employee told me it was a problem with the computer.

Card worked in Nov. but not in Dec, interesting, very interesting!!!

-- tom (flstplt@yahoo.com), December 07, 1999.


Deutsche Bank hit by day-long computer shutdown

By William Lewis in New York

Deutsche Bank 
logoDeutsche Bank has been forced to apologise to many of the world's leading financial institutions after its worst-ever computer problem.

Last Wednesday a systems problem at the German bank's central site outside Frankfurt meant it was unable to participate in the international clearing of interbank payments.

Deutsche yesterday declined to give further details, but an executive said the unprecedented one-day halt to payments to major international counterparties was the most severe technology problem it had experienced.

The system normally deals with about 100,000 transactions an hour, but the bank was unable to use its back-up system because it contained the same software problem.

During the 10-hour shutdown on December 1 Deutsche tried to clear the largest payments manually, but the huge volume of transactions meant many could not be handled until the next day, when the system was functioning again.

The bank has been forced to offer interest payments to banks to which it owed money. Executives say it cleared - or settled - all outstanding trades with counterparties by close of business on December 2.

Deutsche Bank has been telling European and US banks that the problem was un-related to the Year 2000 computer issue.

It has said the problem occurred after the installation of new software in an IBM operating system.

Nevertheless, the system failure has heightened concerns at US and European banks about the possible impact of the millennium computer problem.

Competitors were yesterday questioning why Deutsche would choose to install crucial new Y2K compliant software just a few weeks ahead of January 1.

Competitor banks also point out that the problem comes as Deutsche is completing the full integration of Bankers Trust.

Separately, Deutsche has confirmed that clearing operation of the Deutsche Bvrse, the operator of the Frankfurt stock exchange, has been hit by computer problems.


-- _ (_@_._), December 07, 1999.


Deutsche Bank hit by day-long computer shutdown

Deutsche Bank has been forced to apologise to many of the world's leading financial institutions after its worst-ever computer problem.

Last Wednesday [Dec. 1st] a systems problem at the German bank's central site outside Frankfurt meant it was unable to participate in the international clearing of interbank payments.

Deutsche yesterday declined to give further details, but an executive said the unprecedented one-day halt to payments to major international counterparties was the most severe technology problem it had experienced.

The system normally deals with about 100,000 transactions an hour, but the bank was unable to use its back-up system because it contained the same software problem.

During the 10-hour shutdown on December 1 Deutsche tried to clear the largest payments manually, but the huge volume of transactions meant many could not be handled until the next day, when the system was functioning again.

The bank has been forced to offer interest payments to banks to which it owed money. Executives say it cleared - or settled - all outstanding trades with counterparties by close of business on December 2.

Deutsche Bank has been telling European and US banks that the problem was un-related to the Year 2000 computer issue.

It has said the problem occurred after the installation of new software in an IBM operating system.

Nevertheless, the system failure has heightened concerns at US and European banks about the possible impact of the millennium computer problem.

Competitors were yesterday questioning why Deutsche would choose to install crucial new Y2K compliant software just a few weeks ahead of January 1.

Competitor banks also point out that the problem comes as Deutsche is completing the full integration of Bankers Trust.

Separately, Deutsche has confirmed that clearing operation of the Deutsche Bvrse, the operator of the Frankfurt stock exchange, has been hit by computer problems.

-- Linda (lwmb@psln.com), December 07, 1999.


sorry for the repost... -- _ (_@_._) beat me to it.

-- Linda (lwmb@psln.com), December 07, 1999.


Doesn't Ed Yardeni work for Deutsche Bank? HE HE HA HA HO HO

-- (Polly@troll.com), December 07, 1999.

Polly@troll.com:

Deutsche-Morgan-Grunfeld(sp)

-- zzzzzzzzz (z@z.z), December 07, 1999.


There is a simple explanation here. The current system is not compliant. No IT manager in his right mind would schedule an optional upgrade for three weeks before the rollover. Despite their claims that this is not Y2K-related, it doesn't make sense. They either have the most incompetent IT staff, or they're spinning the hell out of the problem.

100,000 transactions an hour? What happens if the system doesn't come up tomorrow? They admit they couldn't possibly manually complete the transactions so they had to wait. So much for manual workaround contingency plans.

Yes, this is Yardeni's bank. He should be commended for his courageous stance on Y2K all along. He still predicts a 40% chance of a major recession or depression due to Y2K, as of his Nov. 30th market commentary.

-- ariZONEa (inline@the.bank), December 07, 1999.


Okay, let's honestly assess this without all the fear that seems to overwhelm many here..........

Let's assume it was Y2K related......

They fixed it within 24 hours......the financial system although concerned still continued to exist..........now it works fine.......

They couldn't settle at the end of one day so they paid interest, fixed their systems and then settled........

And yes, we will have MANY more of these situations in the coming months. Deal with it people. Just cut out the panic crapola!

-- Craig (craig@ccinet.ab.ca), December 07, 1999.


.....after its worst-ever computer problem.

SO FAR!

-- semper paratus (cash@under.mattress), December 07, 1999.



Yes, Craig, but this was one bank, one day, no publicity 'til a week after the fact. What if they start cropping up simultaneously and/or can't be fixed in a day? I'm not panicking, but after months of hearing how on-top-of-it the banks are, this gives me the willies.

-- Thinman (thinman38@hotmail.com), December 07, 1999.

they fixed it in 24 hours? how, by going back to the old system which will be TOAST in less than 25 days?

WAKE UP!!!!!!

THIS IS SCARY FRIGGIN NEWS!

Mike

who has lost the last bit of optimism he had left.

=====================================================================

-- Michael Taylor (mtdesign3@aol.com), December 07, 1999.


I guess Craig is the name of our newly appointed .Gov shill. Hey do you know the most likely fix in 24 hours. They backed out the FIX/UPGRADE/NEW SYSTEM and re-installed the old non-compliant one and went back to the drawing board with many monthes left for testing.

Oh heck Deustche bank doesn't need computers for January, they can use abaccus and chism-bop.

Use that brain to think it away harder, its not working.

-- Squid (Itsdark@down.here), December 07, 1999.


"...the bank was unable to use its back-up system because it contained the same software problem."

*Sigh*

Craig,

The lights were on, employees could get to work (because they had food, hot showers, running water and the transportation systems worked), the international telecom phone lines worked, etc., etc.... this month. Not the likely "best case" scenario... next month.

"Fixing" simultaneous problems and interdependencies may well be several orders of magnitude "different" in 2000 plus.

Think... "global repercussions."

GI?

Diane

-- Diane J. Squire (sacredspaces@yahoo.com), December 07, 1999.


Ladies and gentlemen:

The combined central bankers are NOW shaking VERY HARD in their Armani suits. THIS is what they talk about as Herstadt Risk. They are VERY fortunate that they were able to go to some other system and reinstal it for the next day. They will NOT have that option in 25 days. The transactions MUST be cleared that day or they cost HUGE dollars (marks) in interest. Several days of disruptions will KILL a big bank in interest liabilities.

Note they OFFERED interest payments, but are unwilling to indicate how much this cost. The banks in question will, no doubt, require enough "interest" to cover the fees of all of their customers who bounced checks and or had to incur fees which had to be backed out, etc. This will turn out to be VERY expensive.

chuck

-- Chuck, a night driver (rienzoo@en.com), December 07, 1999.



Separately, Deutsche has confirmed that clearing operation of the Deutsche Bvrse, the operator of the Frankfurt stock exchange, has been hit by computer problems.

Imagine Wall Street in its current overheated state being "hit by computer problems". That is one very ugly scenario.

-- Mac (sneak@lurk.hid), December 07, 1999.


Can you say "Herstatt"? I knew ya could.

"...unable to participate in the international clearing of interbank payments.

...the unprecedented one-day halt to payments to major international counterparties was the most severe technology problem it had experienced.

...tried to clear the largest payments manually, but the huge volume of transactions meant many could not be handled until the next day, when the system was functioning again. "

What a difference a day makes.

-- jor-el (jor-el@krypton.uni), December 07, 1999.


Craig, you still don't get it, dude. THIS problem was due to attempting to ramrod a Y2K compliant version of the software into place, which misbehaved. We are never told exactly how they "fixed" the problem, but it's a safe guess that they ended up simply RETRACTING the upgrade. (I.e., "un-fixing" as it were.)

We are now 24 days away from January 1, 2000. At which point LOTS of stuff will potentially happen AT THE SAME FRIGGING TIME.

Get it now, dude? Or are you still hopeless??

-- King of Spain (madrid@aol.cum), December 07, 1999.

Hi, Chuck! Mac -- I'm starting to think of Wall St. as just a revved- up EBay -- couple days out of action here and there, no problemo! -- and are the goods any better?

-- jor-el (jor-el@krypton.uni), December 07, 1999.

Craig -- don't worry about me panicking, bub. I'm ready. Or about the other regulars on this board. They're ready. Worry about the several hundred million who, just possibly, have been "deliberately misled" to about Y2K's potential (it's still 'largely' potential) impacts.

Tell those several hundred million or so to cut out the "panic crapola" next month .... hope it helps. Bigger "bubs" than you will certainly be giving that message, so you can rest easy, Craig. As for us? Leave us to "panic" in peace.

Cause, in all seriousness, I ain't scared one bit. But, then, I don't scare too easy.

-- BigDog (BigDog@duffer.com), December 07, 1999.


Herstatt is an interesting problem, because it is due to an attempt to impose the laws of physics on non-physical e-money (fiat currency) -- can it or can it not be in two places at once? The banks KNOW that the other bank is solvent and probably good for the dough tomorrow, but the rules say "no can do."

One near-crisis in the midst of the 1987 markets crash was due to the different transaction clearing times between Europe and U.S. -- one was three days, I think, and the other was five (or 1 and 3, or some such). For that one difference, the international clearing system nearly went down -- ask AG for the details -- he was there.

-- jor-el (jor-el@krypton.uni), December 07, 1999.


By some measures, don't have the references handy but check it yourself if you like, Deutsche bank is either the largest or second largest bank in the world. If you had to make an optimistic case here, it is encouraging that the financial system didn't collapse when this bank was down for twenty four hours. I don't think the pessimistic arguments are real tough to come up with.

-- PD (PaulDMaher@att.worldnet.com), December 07, 1999.

Don't want to be accused of exagerating, they missed one day's payments and the article states their computers were out for ten hours. Have to wonder how many turds in the punchbowl like this it takes before people start leaving the party?

-- PD (PaulDMaher@att.worldnet.com), December 07, 1999.

Thinman & Tom Excellent posts - I love, yes I said love, when I see a post about the financial sector having problems albeit this is in Germany. Its probably been countless times that I've seen spins, media reports from a hundred different angles that the financial sector has been "fixed" and will be immune to any Y2K related problems. The Deutsche bank is an example of reality. I wish we had an insider that could give us the entire story. Where is our German rainbow connection?

Also, Tom thanks for the post about the credit card. That could be one piece in the 1 million piece puzzle. Extremely relevant, thanks for your contribution.

-- Guy Daley (guydaley@bwn.net), December 07, 1999.


Watch out for those Japanese megabanks! When they go down, the dominoes will fall fast!

-- dinosaur (dinosaur@williams-net.com), December 07, 1999.

I'd like to know what Ed Yardini is "really" thinking now. He may have changed his economic forecast in the last 24 hours.

-- Ray Hildenbrand (Crazynick@msn.com), December 08, 1999.

From: Y2K, ` la Carte by Dancr (pic), near Monterey, California

$137K is chump change. It was the scare that was significant, not the cost. I have to wonder about Yardini's "optimistic" statement. It changed so little from what he had been saying that it hardly seems worthwhile to issue it, if not to deflect attention from his employer's problems and express confidence that his own bank would be OK. This is hard to say, since he's been the best economist we have as far as his willingness to examine Y2K issues and think through their implications.

-- Dancr (addy.available@my.webpage), December 08, 1999.


They've GOT to start listening to Ed Yardeni! What do they think they pay him for?

-- Mad Monk (madmonk@hawaiian.net), December 08, 1999.

SPARE CHANGE? ANYBODY...ANYBODY..? [g]

-- Michael (mikeymac@uswest.net), December 08, 1999.

The Japanese so-called mega banks technically bankrupt with funny accounting allowances to allow the world to look past silly things like Assets. Balance Sheet we don't need no stinkin Balance Sheets. A stiff ill wind (y2k???) could knock the whole house of cards down.

Nothing 400 billion in options won't solve though. Al has a turbo charger trying to keep the liquidity pump primed.

-- Squid (Itsdarker@down.here), December 08, 1999.


I work for DB in the Americas, this was the first time I had heard of this (the news story). KOS is probably right, since the DB Y2K lockdown started Dec 1.

-- me ($$$@$$$.com), December 08, 1999.

o.k. - o.k. I'll try to connect a friend of mine working in the Deutsche Bank as a manager in the IT department to find out:

Why they have installed a new IBM OS or whatsoever, and

How this is related to Y2K.

I'll update this forum in any case by tomorrow. I can garuantee for this persons trustworthyness (how to spell?)

BTW: had another discussion about 1900 with my best friend yesterday. He is working for bank xxxx another of the big 5 banks in Germany. His responsibility is the Y2K check on the internal network of his co. He for example has received officially written AND signed garuantees from his companies biggest suppliers (no names here, are top 100 co's around the world) where this suppliers have stated: "THAT THEY WILL PAY FOR EVERY DAMAGES CAUSED BY Y2K FAILURES OF THEIR EQUIPMENT".

That's very real, I saw it with my own eyes as I asked him for an example. The assets of this suppliers are worth some hundred billion USD.

Back to the more interesting things here. I don't think that the Deutsche Bank or simular companies are at risk. I know some inside stories about thier tight relationship with IBM, DELL a.s.o. and their bundled ability to fix failures.

Of risk are the SME's and the small banks. Remember, Herstatt was a small bank with only some 100,000 of customers.

IMO we will see lots of small banks breaking down due to risky loans from chapter 11 bankrupcies of SME's during the first quarter '00.

This is what Gartner Group is stating. This is concludent with all analysis from EU authorities, insurance co's a.s.o. AND for the US, Japan, Australia etc. it will be the same.

RESULT ?? Lots of unemployment. Former employees loose the ability of paying back mortgages and loans and dredit card bills.

RESULT ?? Real estate prices will drop again (like it did some years ago). Mortgage financed stock positions will be not longer backed up by real? values. Some more banks will break. Stocks will be sold in panic.

RESULT ?? Interest rates will raise for standard customers as NEW money won't come in for financing the bubble economies debt. Stock evaluation has to be recalculated (You know about the repercussion of raising interest rates)

BTW: Diane, can you provide the forum with the thread "370,000,000,000 USD are enough..." where the NY FED's liquidity options have been discussed. THNX!

RESULT ?? While very very few of the currently (Feb '00) bankrupt co's have been mission critical suppliers for the fortune 500 some of them will have to face a decrease of earnings, others will not. Interest rates are jumping up and down day by day and the DOW co's will have to reduce their earnings expectations due to dincreasing interest rates (fair warning by SEC).

RESULT ?? DOW, NASDAQ, CAC '40, FTSE 100, DAX, a.s.o. will loose point by point. THIS WILL EAT UP LIQUIDITY !!!!!. >Interest rates will increase more and more. Some more SME's can not pay this high interest rates and KABOOM. Some few will hurry to buy gold. How stupid. Gold isn't needed that much in todays production. Gold hasn't an interest rate.

This is an very optimistic scenario without encountering oil, gas and transportaion shortages. If due to some (more or less local and more or less short) power outages some of the farmers's silo functionalities will die the dead of emb sys we see an immidiat increas of food prices + increase by higher transportaion costs + increase due to lower imports of fruid and veg's.

Again, this hasn't taken into account the possible break down of machinery equipment due to bad power quality. So it doesn't need a banks bankrupcy to blow out some very few but needed SMW's business.

-- Rainbow (Rainbow@123easy.net), December 08, 1999.


What? No expert spin, er ah commentary, from our resident banking authorities Flint, Hoff and Decker?

Still think Fast Eddie's being truthful on his odds Ken?

LOL

-- a (a@a.a), December 08, 1999.


Monk -

According to the WSJ, Yardeni's just another doomer, so why should they listen to him? Far better to have one's ears tickled by folks like Abby Joseph Cohen and her ilk.

So here we are, heading into what Cory Hamasaki calls the "discontinuity" at year's end, stock market having embraced the notion that "momentum investing" is somehow different from putting 10 large on Seabiscuit to win in the eighth, and prudent preparations such as stocking up for 30-60 days are characterized as "antisocial".

"It was the best of times, it was the worst of times, it was the age of wisdom, it was the age of foolishness, it was the epoch of belief, it was the epoch of incredulity, it was the season of Light, it was the season of Darkness, it was the spring of hope, it was the winter of despair, we had everything before us, we had nothing before us, we were all going direct to Heaven, we were all going direct the other way--in short, the period was so far like the present period, that some of its noisiest authorities insisted on its being received, for good or for evil, in the superlative degree of comparison only."

-- Mac (sneak@lurk.hid), December 08, 1999.


I think that you are right, "a". Some threads appear to come pre-sprayed with "Polly Off"....

-- King of Spain (madrid@aol.cum), December 08, 1999.

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