Banks clear record £25bn to beat bug

The banking system yesterday beat the millennium bug by processing a record 48m retail transactions worth £25bn through the Bacs clearing system, four times the usual amount on an average day.

The trades, which involve payments made between banks including such items as salaries and mortgage payments, were input into the sys tem on December 29, when it reopened after Christmas, and settled this morning when the banks opened for the first time this millennium.

The Financial Services Authority said that business resumed as normal on the financial markets for the first day of trading. "The evidence we have received so far from financial institutions around the country confirms that services and systems are working well," said Michael Foot, managing director and head of financial supervision at the FSA.

The FSA will continue to monitor the situation over the coming days but expects to close the millennium event office today. Only minor glitches were reported after banks and financial services companies spent millions of pounds checking their computer systems. Lloyds TSB alone spent £150m.

The Bank of England, which said a record £30.3m of cash is in circulation, had stockplied £7bn of additional notes of which only £1m was needed.

The bank will start to destroy older £20 notes which were left in circulation a year longer than usual to meet any surge in demand.

Other notes will remain in branches or be returned to the bank and circulated when needed.