FDIC Inspector General worried about accuracy of Bank's Y2K examinations.

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Prepare for Public Confidence Deficit

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


Leach asked, for example, why companies assessing banks' Year 2000 readiness have been less confident than banking regulators. He also noted that the inspectors general at some agencies, such as the Federal Deposit Insurance Corp., have raised questions about the thoroughness or accuracy of the agencies' Year 2000 examinations of banks.

The IG's have raised questions with good reason. Banks are not nearly as prepared as the 97% "Satisfactory" figure bandied about by FDIC Chairman Tanoue indicates. The IG's have good reason to be suspect of the ratings assigned by bank examiners during the latest round of Y2K assessments. The private survey figures are much more realistic.

-- Nabi Davidson (nabi7@yahoo.com), April 14, 1999.

For those wondering why the FDIC's Y2K exams have showed the banks doing so well in fixing Y2K problems, here's the answer from the FDIC DOS Manual of Examination Policies:

Rationale of Bank Examinations

What are the purposes of bank examinations? Although many answers to this question could be given, several fundamental reasons can be identified. The first relates to the maintenance of public confidence in the integrity of the banking system and in individual banks. Such confidence is clearly essential because the system's customers serve as the source of funding, without which banks would be unable to meet their most fundamental objective of providing financial services.

Could it be that the FDIC is simply trying to carry out its stated objective and keep consumer confidence in the banking system high, regardless of the truth???

-- Don't Bet On It (banking@is.OK?), April 14, 1999.

Not here to argue - just make a couple of comments. I am the Compliance Officer and Y2K project coordinator for a $250 million two bank holding co. I have been through 3 on-site Y2K exams by FDIC. Let me tell you, it wasn't fun. We have done our homework and are working as we speak to resolve this problem through both remediation and testing as well as contingency planning (including the purchase and installation of a 100kw generator). But when the regulators come to your bank to examine you, they come with the intent of finding problems. The burden of proof is on the bank. There is no compliant until proven non-compliant - it's just the opposite. During our Phase 2 exam, they spent two weeks with me, going over every piece of documentation I had, along with all testing results and acceptance reports. In addition to the on-site exams, I receive a call from the FDIC at least once each couple of months to conduct a telephone exam. I'm just letting you know that FDIC exams are not just some public display intent on maintaining confidence in the Banking system. Exams are stressful, extensive, and intentionally comprehensive to uncover any potential problems. But I'm not really complaining - exams keep me in a job!

-- Diana (dstubblefield@ldd.net), April 15, 1999.


I'm not saying all Y2K exams were invalid. My point is just that if the guidelines were followed as written, there wouldn't be nearly as many "satisfactory" ratings as were assigned.

-- Nabi Davidson (nabi7@yahoo.com), April 15, 1999.


As I recall, you've posted before. I just wish my bank was as concientious (sp?) as your bank!


-- Diane J. Squire (sacredspaces@yahoo.com), April 15, 1999.

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