More than a week after Hurricane Katrina hammered the Gulf Coast, some banks are still struggling to provide their customers with basic financial services and access to their accounts.
Electricity and phone service are still down across wide areas of Louisiana, Mississippi, and Alabama, so some banks cannot run their core transaction processing systems in the region.
Vendors of disaster-recovery services say that some of their bank and credit union customers managed to keep their systems up by transferring operations to backup sites. Others lost some or all of their capabilities and brought them back later by doing so.
The Federal Deposit Insurance Corp. has identified approximately 270 financial institutions based in areas that the Federal Emergency Management Agency have classified as disaster areas due to Katrina, and another 10 or so that receive more than a third of their deposits from the disaster zone.
As of Sept. 3, five days after Katrina hit and in its first attempt to document the scope of the storm's impact, the FDIC estimated that operations at about 70 banks were down, either in whole or in part, though it conceded that the figure included data from only 93% of the banks in the region. By Wednesday, with 100% of banks reporting, the FDIC said that figure had dropped to 60.
The Federal Reserve Bank of Atlanta said Wednesday that there are "less than five" institutions in the stricken area that remain unable to receive automated clearing house files.
Douglas J. Barton, the product manager at the Centurion Backup and Recovery unit of Jack Henry & Associates, said "there are many different situations. Some have lost their buildings; some are still not allowed into the area." And without power and communications, "if they were there, they wouldn't be able to do anything."
Patrick Doherty, the senior vice president of marketing at SunGard Availability Services, the disaster-recovery unit of SunGard Data Systems Inc., described similar problems. "We continue to have difficulty in reaching many of our customers," he said.
Virginia Garcia, a senior analyst at TowerGroup of Needham, Mass., a market research unit of MasterCard International, said employees of smaller banks in the most devastated areas may be thinking more about survival than about restoring their businesses. "I don't know that people have even begun to think about what they're going to do from a business-resilience perspective," she said.
Without a functioning core system, a bank is effectively out of commission, unable to process deposits, withdrawals, or payments for demand deposit accounts, Ms. Garcia said.
Only 40% of the nation's community banks outsource their core processing, Ms. Garcia said. Customers of those that handle their transactions in-house are the most likely to be without access to their money, she said.
Even if they have left the area, these customers may be unable to withdraw cash from remote ATMs if the networks cannot confirm the validity of the accounts, she said.
However, Warren L. Coles, an executive vice president and chief operating officer of Pulse EFT Association, said Wednesday that these customers can usually withdraw some cash from ATMs.
Pulse and other EFT networks provide a service called "stand-in" for their bank participants. This service authorizes transactions even if the machine cannot obtain authorization directly from the bank, though Mr. Coles said banks often set lower withdrawal limits for stand-in than usual.
Comprehensive figures on banks that have been forced to shut down are hard to come by. Mr. Barton said that Centurion had identified 53 banks and credit union customers in the hurricane zone, and that most of them were probably shut down at some point after the storm.
As of late last Thursday, Centurion could not contact more than 30 of those customers; by midday Tuesday, five remained out of touch.
Mr. Barton said that since Katrina struck, eight of those customers have officially declared a disaster and shifted their core processing to one of three Centurion backup centers. Three of them have since been able to move their processing back to their own sites, he said.
When bankers contact their disaster-recovery partners, their first goal is to maintain or restore core processing capabilities, Mr. Barton said. Afterward, secondary tasks include hosting online banking services, operating a bank's call center, running its automated teller machine network, and connecting ATMs to shared networks.
But bringing a bank back "up" may not mean restoring all of its capabilities immediately, he said.
Mr. Barton said that in some cases, banks may declare a disaster before the storm hits and either move their processing to a backup site or notify the vendor that they are planning to do so.
The $22.1 billion-asset Hibernia Corp. of New Orleans activated its own backup centers in Houston and Shreveport before Katrina hit.
The vendors say that bankers have shown a wide range of responses to the storm.
Mr. Doherty said one Gulf-area bank was unwilling to relocate staff to a SunGard emergency operations center in Scottsdale, Ariz., after its own systems were lost because "they wanted to stay local."
Because it hosted the bank's backup systems, Mr. Doherty said, SunGard was able to build a partial replacement - enough for the bank to handle some transactions - and deliver it to the bank.
Norman J. Balthasar is the chief operating officer and a senior vice president at Fiserv Inc., which provides outsourced banking technology. He said a bank in Pascagoula, Miss., moved a crucial mainframe computer twice, first to the second story of its main office after the ground level flooded, then to a branch on dry ground.
Fiserv, which is based in of Brookfield, Wis., has shifted some of its own processing operations from New Orleans to Houston and Atlanta, Mr. Balthasar said.
Fiserv has been unable to locate eight or nine of its employees from the New Orleans center, Mr. Balthasar said. "Hopefully that means we just can't get hold of them," he said.
