http://www.sunday-times.co.uk/news/pages/tim/99/03/20/timbizbli02004.html?2215803

From the London Sunday Times

"Headaches start as the bug bears down on banks"

The Cost so far

Will the dawning of the year 2000 bring financial chaos? This week the man who should know raised just that spectre.

Banking industry regulators do not go in for scare-mongering. But with a few carefully chosen words, Michael Foot has sent shock waves reverberating round the City and sent savers scurrying for safety.

The quiet, bespectacled man from the Financial Services Authority admitted that 12 large financial institutions are so far behind with their preparations to cope with the millennium bug that they could pose a serious risk to their customers and the markets. He is so worried by their potential to do damage that he is threatening to close them down.

This grim warning is the first real admission from the City of the potential horrors that lie in store when the year changes. Until now, the Bank of England has insisted that Britain's financial institutions were coping with the bug. That is what the institutions themselves maintained. Now it is clear that the truth is very different. And so intertwined are the various financial institutions that if one fails, the entire system may be put at risk. "The financial industry is like a house of cards," shuddered one insider yesterday. "If one business founders, the others feel it."

Suddenly, those individuals who have insisted that they will be withdrawing all their cash from the bank before the end of the year do not seem quite so misguided. The prospect of the millennium bug eating your savings may be more than just the nightmare of overactive imaginations. At a high-powered millennium meeting in Washington recently, delegates were stunned to hear Henry Kissinger announce that he intended to withdraw all his money from the bank as 2000 nears. Mr Foot's statement this week has fuelled fears that lesser mortals will follow the former United States Secretary of State's lead, precipitating a dangerous run on the banks.

There are fears that computer breakdown will wipe out details of people's investments, transfer sums to the wrong accounts and generally put the finances of individuals and corporations in jeopardy. The FSA is insistent that companies must have full back-up systems in case of a massive computer breakdown and it is by no means confident that all yet do.

It was inevitable that a few small businesses would fail to prepare adequately for the arrival of the new millennium. But Mr Foot was not talking about small businesses. What was so stunning about his revelations was that they related to 12 of the most important 160 businesses in the financial services sector. These, on the regulator's own definition, are "high-impact" companies, banks and insurers whose failure to be bug-proof would have serious consequences not just for customers but for the entire financial markets.

Yet we are left to guess the identity of the dirty dozen. Mr Foot dare not name and shame them for fear of legal action. His secrecy led to frantic speculation in the City as bankers tried to identify the culprits. There were equally frantic efforts to insist that they were not the guilty ones. The favourite line from many British banks was that all the 12 offenders are foreign-owned. That, says the Financial Services Authority, is certainly not the case.

At Action 2000, the Government's anti-bug unit, the director-general, Gwynneth Flower, is trying to play down fears of financial disaster. The former army major proclaimed: "If I have confidence in any sector in Britain it is the banking sector. But it would be foolish to say that everything in the garden is rosy."

She believes that the financial services industry has spent more time and effort dealing with the bug than any other industry and that Britain is ahead of any other country in seeking to cope with the problem.

Robin Guenier, the man whom the last Government first asked to help the country to cope with the bug, is less sanguine than Ms Flower. He was widely derided as the Cassandra of the millennium because of the dreadful picture he painted of national chaos. Now his predictions are coming dangerously close to being borne out. He says: "If the financial services industry is leading Britain, then that does not say much for the rest. And if Britain is leading the world, then heaven help us."

The international nature of the financial services industry does exaggerate the risks it faces for much of the rest of the world certainly has lagged behind the UK in year 2000 preparations. Abbey National, for instance, confident that its own systems are compliant, has a small operation in France which was recently checked for compliance under the French Government's criteria. It was, said the Abbey, "one of the few businesses to meet the deadline". There is widespread scepticism in the City about the ability of many European institutions to address the problem adequately.

The potential computer problems have been compounded for the financial services industry by the introduction of the euro. Many were deflected from the year 2000 issue as they struggled to prepare for the new currency. Now that they need to finish preparing for the end of the millennium, they cannot find the people to do the job.

Mike Hudgell, marketing director of Gresham Computing, which specialises in testing IT systems, says: "A lot of firms have left it too late to do their year 2000 work. They know what needs to be done but simply do not have enough time to do it and test that it will work. Almost every major IT project ends up being delivered late. This is the one that cannot be."

Robin Guenier believes that the first casualties could begin to appear very soon. As many financial companies operate an accounting year that runs from April to March, their software will soon be covering the period to March 31, 2000, triggering the bug's early appearance.

Mr Guenier does not sound like a scaremonger to Nick Bottomley, of the Swiss banking software group Fin'Objects. "I have never heard of a firm that has admitted it has a year 2000 problem yet everyone in the City has it and, up till now, they have been hiding it," he says. He argues that companies have tried to take shortcuts and the results could be disastrous. Commerzbank, one of Fin'Objects's clients, was forced to ditch virtually all its computers and start again with a new system to cope with the euro and year 2000.

Mr Bottomley fears that the 12 companies that feature on Mr Foot's list are only the most visible offenders. "The others, who have been hiding their problems, will be found out later," he says.

That is why he will be removing all the cash from his bank accounts before the century ends.

The Cost so far

Barclays .................#250 million

NatWest ..................#170 million

Abbey National ...........#134 million

Nationwide ...............#90 million

Halifax ..................#80 million

Standard Life ............#80 million

Bank of Scotland .........#55 million

HSBC Midland .............#43 million

Alliance & Leicester .....#40 million

Legal & General ..........#39 million

Royal Bank of Scotland ...#29 million

Bradford & Bingley .......#7 million

Northern Rock ............#5 million

+++++++++++++++++++++++++++++++++++++++++++++

=============================================

Me, I'm taking ALL my money out.

You know it makes sense - Andy

-- Andy (2000EOD@prodigy.net), April 14, 1999

Answers

Andy,

Why is it you find all these juicy stories in your media and all we can find in ours is "Clinton bombs Yugoslavia to prove his Manhood" stories? :-)

-- Sharon (sking@drought-ridden.com), April 14, 1999.

I dunno Sharon - let's see what y2k prole, hoff, flint and all the other bankinh shil.. uh, analysts, have to say on this :)

-- Andy (2000EOD@prodigy.net), April 14, 1999.

Not the first time I've heard this. Seems to me the British believe in mobilization more than we do, and are more honest about it. From what I've seen lately in US media, it seems our press is more of a government mouthpiece (not counting folks like Drew).

-- Margaret (janssm@aol.com), April 14, 1999.

Andy: Thanks for another good post. For one thing, I was surprised to see the reference to Henry K. taking his money out - thought that one was unconfirmed still. I had seen reports of the 12 banks being in Y2K land-of-crap but this article really brings it out. I am wondering what reaction, if any, the Brittish people have had to this story. Any insights or thoughts?

-- Rob Michaels (sonofdust@com.net), April 14, 1999.

"I am wondering what reaction, if any, the Brittish people have had to this story. Any insights or thoughts?"

Nope. I'm freezing my ass off here in Denver and only get any news about Blighty on BBC America or the net.

Ah well, planning a few days in San Francisco soon where I hope it's a DAMN SIGHT WARMER THAN DENVER :)

This article is one of the few I've read that even begin to address the imported data problem.

I am fed up to the back teeth with listening to no-nothings like hoff, flint et al on this question. It's much more than just code here, it's all about confidence and WAR in the Balkans, and OIL and all the other crap. It's about WALL STREET and the Dow and Japanese housewives and a pack of cards that is balanced on the edge of a crumbling cliff.

Try explaining all this to flint.

Good luck.

Oh yeah - one more thing. The code is broken in the banking system. There is no protection against imported data. Compliant banks can NOT protect themselves from non-compliant corrupt data corrupting their databases.

Wait and see.

-- Andy (2000EOD@prodigy.net), April 14, 1999.

"Until now, the Bank of England has insisted that Britain's financial institutions were coping with the bug."

Wait, just wait. <:)=

-- Sysman (y2kboard@yahoo.com), April 14, 1999.

I liked the following: "It was inevitable that a few small businesses would fail to prepare adequately for the arrival of the new millennium."

Like what, 3 or 4? LOL

I assume that small business in GB, as in USA, as a group, employ the largest percentage of the workforce.

-- Mitchell Barnes (spanda@inreach.com), April 15, 1999.

That article, now almost a month old, has already been discussed at great length, and in several threads, on this forum. What is this, a slow news week?

Jerry B

-- Jerry B (skeptic76@erols.com), April 16, 1999.

Jerry:

Andy will go back as far as required to find material he likes. On the GM thread, he went back a *year*.

But on one point I agree with Andy entirely. We must wait and see. The number of things that *can* go wrong is beyond counting. The extent to which things *do* go wrong, we'll find out all too soon.

-- Flint (flintc@mindspring.com), April 16, 1999.

Flint,

I guess that as long as he does not go back and dig up my actual bowling average, I should not be too concerned. :-)

Jerry

-- Jerry B (skeptic76@erols.com), April 16, 1999.

Flint/Jerry,

You guys amaze me - so what if this is one month old - facts are facts, the UK Banking systems is a shambles at the moment, probably in WORSE shape than a month ago becuse time is running out and you two maroons can't seem to grasp this fact.

By the way, did a little digging and the bowling average is not pretty Jerry - two words - more remediation :)

-- Andrei-hung-lo (2000EOD@prodigy.net), April 16, 1999.

Andy:

Sometimes you amaze me. Yes, a year ago it was a fact that GM had a long way to go. It's also a fact that they've come a long way. In a dynamic world, facts about the status quo become obsolete. Think about it.

And OK, a month ago Mr. Foote was threatening to close down 12 financial institutions for falling behind. What are the facts today? Have the institutions been named (a month ago they didn't even know who Foote was talking about)? Has anyone been closed down? Have the offending institutions taken sufficient remedial action?

If there are real financial problems, I'd like to monitor them. I'm satisfied that Foote *wasn't* satisfied last month. What has been happening since? Unlike you, I'm not satisfied to form conclusions about the future based on what was true at one particular time in the past. Trends matter.

-- Flint (flintc@mindspring.com), April 16, 1999.

"Trends matter."

So does time - a commodity fast running out.

-- Andy (2000EOD@prodigy.net), April 16, 1999.

Andy,

It would be one thing if it had not been noticed here since it was published, but it has been discussed here, and at great length, including discussion of the Henry Kissinger reference and whether that statement should be taken seriously in the absence of corroboration.

This forum has more than enough extraneous threads without adding reruns of pertinent threads that have already been amply digested. The latter could drown us just as readily as the former seems to be doing.

(Please don't tell anyone how often the bowling average and the golf average overlapped.)

Jerry

-- Jerry B (skeptic76@erols.com), April 17, 1999.

"This forum has more than enough extraneous threads without adding reruns of pertinent threads that have already been amply digested. The latter could drown us just as readily as the former seems to be doing."

Well EXcuuuuuuuuuuuuse-meee Jerry,

I missed the thread the first time around otherwise i wouldn't double- post. sorry about that.

Being a Brit I saw the headline and posted it - some of us do have a life other than this forum you know :)

You'll have plenty of time for golf next year, although the greens won't be in too good a condition. Bowling might work if you employ some midgets at the rear of each lane to do the nescesarry.

-- Andy (2000EOD@prodigy.net), April 17, 1999.

I think I read somewhere that Australia announced the names of some y2k slacking companiesjust recently. If anyone can point me there, I would appreciate it.

Thanks in advance!

-- J (jart5@bellsouth.net), April 17, 1999.