Banks Ready for Y2K Majority Not Worred About Accounts W A S H I N G T O N, April 13  U.S. banks are making good progress on fixing millennium-related computer problems and the public should not panic about the issue, top banking regulators said today.

They told Congress most banks had taken the necessary steps to rid their computer systems of the so-called Y2K computer bug and said even if some problems did crop up, contingency plans were in place to limit their impact.

I am increasingly optimistic about prospects for a transition relatively free of disruptions, Federal Reserve Governor Edward Kelley told the House Banking Committee. The most likely outcome is that Y2K technical issues will cause no more than inconveniences in the financial sector of the United States.

The millennium, or Y2K, bug 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 systems crashes.

Withdrawal Not Recommended

Comptroller of the Currency John Hawke said the overwhelming majority of U.S. banks would meet a June deadline for the complete testing of their computers, with 96 percent of national banks now having satisfactory Y2K ratings.

Overall, the banking industry has made admirable progress in getting ready for the century date change, he said. I think the banking industry is going to come through this Y2K challenge with flying colors. The regulators urged consumers not to rush to withdraw money ahead of the millennium. Many Americans are expected to load up on cash as 1999 draws to a close, putting a further strain on banks. We do not believe the public needs to hold excess cash, Kelley said. We expect the normal payment methods, including credit cards and checks, will be functional and funds  held in depository institutions are most safely kept right there.

He said the Federal Reserve had detailed plans to make extra cash available to banks if they needed it, although it was not expecting to see a surge in withdrawals.

72 Percent Not Worried

A study released today by the National Association of Federal Credit Unions found 72 percent of consumers surveyed were not worried about the safety of their accounts at financial institutions, while 22 percent were worried enough to consider withdrawing some funds before the end of 1999. If you are concerned, take money for a long weekend, but dont take more than that, said Office of Thrift Supervision Director Ellen Seidman, noting mattress stuffing carried physical, as well as fiscal, risks. Seidman said there were practical steps consumers could take to protect themselves, the most important being to keep copies of financial records and, toward the end of the year, even ATM transaction slips. Bank groups testifying at the hearing said the industry was sparing no expense in its efforts to beat the Y2K bug, and urged lawmakers to pass pending legislation limiting lawsuits stemming from the issue. Since 1995, the banking industry has devoted millions of man-hours and billions of dollars to addressing Y2K, said Scott Anderson of Zions First National Bank, testifying on behalf of the American Bankers Association. The litigation threat is an impediment, a distraction from the tremendous task at hand. Some lawmakers have also suggested a special Year 2000 holiday either Dec. 31 or one of the first business days after the new year, to give companies an extra day to check their systems are working properly. But Kelley said this could send a troubling signal to the public and to financial markets. We are opposed to taking actions that could unnecessarily erode public confidence in the industry, where erosion of confidence can create significant destabilizing effects on our economy, he said.

-- Norm (nwo@hotmail.com), April 14, 1999

Answers

most banks ... most likely outcome... even if some problems did crop up... relatively free of disruptions... I think ... We expect...

That's right, Norm. Leave YOUR money right where it is.

R.

-- Roland (nottelling@nowhere.com), April 14, 1999.

Shutting down the banks for a single day isn't neccissarily bad.

Roosevelt shut down the banks for 4 days for the time to pass new bank laws to instill american confidence in the banking system. Subsequently the day after deposits totaled more than withdrawls. (From the Century on ABC, Petter Jennings.)

And that is what we need. Confidence in the Banking system.

Lack of confidence led to the historical trouble before.

It can do it again.

Father

-- Thomas G. Hale (hale.t@worldnet.att.net), April 14, 1999.

I wonder why this article didn't quote Comptroller of the Currency Hawke's written testimony: "The testing process has proven to be more complex, time consuming and costly than many banks anticipated."

His office gave 12% of national banks with more than $1 billion in assets a "needs improvement" grade.

And this is the industry which is suppose to be ahead of all others in y2k repairs? Not good news, Normy.

-- rick blaine (y2kazoo@hotmail.com), April 14, 1999.

I thought a fiat money system and lack of liquidity caused the banking problem. Was it simply a confidence issue? So when people wanted their money, it was really confidence building that they were looking for?

Would this work? I borrow 150k from the bank to build a house, the amount payable to the bank upon demand. 3 years later the banker wants his money. I tell him I disassembled the house and loaned 97% of the lumber to others so they could build, disassemble and reloan the lumber out to others so they could etc, etc. I tell him not to worry, have confidence. Have the government pass a law? What am I missing here?

-- daryl (rushmore@dialypost.com), April 14, 1999.

A snip from the article Norm posted:

Comptroller of the Currency John Hawke said the "overwhelming majority" of U.S. banks would meet a June deadline for the complete testing of their computers, with 96 percent of national banks now having satisfactory Y2K ratings.

Compare that deadline with...

http://www.weissratings.com/y2klies__21099.htm

* The Federal Financial Institutions Examination Council (FFIEC), which coordinates various banking regulators, including the Federal Reserve, the Federal Deposit Insurance Corporation and the Office of Comptroller of the Currency, clarified this requirement in an August 28, 1998 email to bank CEOs, entitled "Year 2000 Questions And Answers," stating: "The FDIC expects each financial institution to meet the following key milestones in the Year 2000 testing process by the date indicated : ...December 31, 1998 -- testing of internal mission-critical systems should be substantially complete."

-- Kevin (mixesmusic@worldnet.att.net), April 14, 1999.

Another interesting snip:

http://www.weissratings.com/y2kbank__0399.htm

[snip]

17% OF U.S. BANKS RECEIVE "BELOW AVERAGE" Y2K GRADES; 5% RATED "LOW"

Findings Contradict Regulators Tallies

PALM BEACH GARDENS, Fla., March 8, 1998  In a new survey of Y2K preparedness, 247 of 1,128 banks and S&Ls reported completion dates that were deemed to be inadequate, according to Weiss Ratings, Inc., a leading bank rating agency. Of those, 195, or 17%, were assigned a Y2K grade of "Below Average," while 52, or 5%, were rated "Low."

The Weiss Y2K survey, mailed on December 30, 1998 to 10,715 federally insured depository institutions, asked 13 questions about each companys timeline for completing various milestones in the Y2K remediation and testing process.

In response to one of the most important questions  Did the institution fix and test all internal mission-critical systems before year-end 1998?  more than one third answered "no." This was despite a regulatory mandate that these systems be "substantially" completed by December 31, 1998.

"The varying interpretations of the word substantially by the banks and S&Ls are creating industry-wide ambiguity," commented Martin D. Weiss, Ph.D., chairman of Weiss Ratings, Inc. "Many banks report theyve complied with this regulatory benchmark, even though their expected completion dates remain months into the future. We believe they may need that time to complete the additional tasks of fixing and testing service providers systems and non-mission-critical computer programs."

The Weiss results contradict recently announced tallies by the FDIC  that only 2.9% of insured institutions have failed to achieve a "satisfactory" rating in their Y2K compliance evaluations.

[snip]

-- Kevin (mixesmusic@worldnet.att.net), April 14, 1999.

By the way, I do think almost all U.S. banks will be compliant in time. What bothers me is that contradictory dates and figures are out there. The differing dates do not inspire confidence in the validity of comments that these organizations issue.

-- Kevin (mixesmusic@worldnet.att.net), April 14, 1999.