Report plays down Y2K risk at U.S. Federal Reservegreenspun.com : LUSENET : TimeBomb 2000 (Y2000) : One Thread
04/12 13:58 Report plays down Y2K risk at U.S. Federal Reserve
By Adam Entous
WASHINGTON, April 12 (Reuters) - The U.S. Federal Reserve should be ready in time for the "millennium bug," reducing the risk to computer systems that link thousands of banks and process trillions of dollars in checks and securities, according to a congressional report.
The Senate's special committee on the Year 2000 computer problem said on Monday that 98 percent of Federal Reserve systems were year 2000 compliant as of February. But the committee's chairman, Sen. Robert Bennett, said the Fed had to do more to guard against unexpected disruptions, which could send shock waves through the economy.
The millennium bug, often referred to as Y2K for year 2000, arises because many older computers record dates using only the last two digits of the year. If left uncorrected, such systems could treat the year 2000 as the year 1900, generating errors or system crashes next Jan. 1.
Congress is concerned that computer glitches next Jan. 1 could disrupt the Federal Reserve System, which oversees more than 5,000 U.S. bank-holding companies, 994 state-chartered banks and the U.S. operations of 256 foreign banks.
These systems provide cash, process checks, make electronic payments and settlements, receive tax receipts, maintain accounts, and issue, transfer and redeem federal securities. In 1998, the system averaged 390,000 electronic funds transfers per day totaling more than $1.3 trillion.
The General Accounting Office, a government watchdog agency, warned that major computer problems at the Fed could cause "serious national and international financial disruptions."
It urged the Federal Reserve to focus on international systems that may be particularly vulnerable to failure next Jan. 1, and to complete its contingency planning.
But the report added; "If FRS (the Federal Reserve System) implements its plans, it will have effectively reduced the risk of such failures."
Fed officials have repeatedly emphasized that U.S. banks appear to be in good shape for the millennium change and have gone through the necessary rigors of replacing old equipment and testing their systems.
Still, the Fed is worried about its ability to provide emergency loans to banks whose computers might seize up because of the year 2000 bug, according to Fed officials.
Bennett, a Utah Republican, said he was optimistic Fed systems would avert major problems.
"Irrational exuberance aside, the GAO report outlines a responsible level of readiness in the Federal Reserve Board that will bolster confidence in the ability of U.S. financial institutions to function," Bennett said.
"Unlike many other federal agencies whose Y2K readiness must be taken at its word, the Fed's compliance has been independently verified," he added.
Consider this quote from the article:
"Unlike many other federal agencies whose Y2K readiness must be taken at its word, the Fed's compliance has been independently verified," he added. "
-- Ray (email@example.com), April 12, 1999
I'm looking forward to reading the testimony. It should appear, sooner or later, at http://www.senate.gov/~y2k/hearings
-- FM (firstname.lastname@example.org), April 12, 1999.
I am sure their systems are compliant. They wouldn't be very good manipulators if they weren't, now would they... ; )
sleepin' under the kitchen table...
-- Dog (desert dog @-sand.com), April 12, 1999.
I have yet to see a good explanation for the banking system's plan for dealing with corrupt data from overseas institutions. Maybe no plan is needed because there will be a known limited quantity of data to be dealt with. Are you out there Alan? Is there any reason to keep this a secret? Some of us would like to know the basis of the Fed's confidence.
-- Puddintame (email@example.com), April 12, 1999.