Y2K - Banks Not Ready - Nearly 25% Still Have Work Ahead

Erich Luening

CNet.com

Despite mounting pressures from federal regulators, a large number of financial institutions have failed to get their Year 2000 programs in gear, according to a new survey.

The survey, conducted by Weise Ratings admits the results contradict recently announced tallies by the FDIC that found only 2.9 percent of insured institutions have failed to achieve a satisfactory rating in their Y2K compliance evaluations.

The difference between the two surveys represents a difference in interpretation, and in the timing of when the surveys were conducted, Weiss said.

"It has to do with the interpretation of 'substantially complete'," said David Lackey, president of Weiss Ratings. "I don't know what [the FDIC's] interpretation is. As far as we are concerned it means the completion with internal mission-critical systems," by the specified regulatory deadline of December 31, 1998.

The varying interpretations are creating industry-wide ambiguity, according to the firm. Many banks report they've complied with the regulatory benchmark--even though their expected completion dates remain months in the future.

FDIC did not comment on the discrepancies between the two surveys, or on the Weise survey.

By evaluating the banks' actual or expected completion dates for critical tasks, the Weiss Y2K survey separated those that have truly made good progress from those that appear to be lagging behind.

At the other end of the spectrum, 177 institutions, or 15.6 percent, reported data that Weiss interpreted as an indication of "high" progress in their Y2K preparations. The balance, representing 62.5 percent of respondents, indicated a level of progress that was deemed "average," reflecting adequate preparations at the time.

Weiss executives suggest consumers and analysts judge the ratings in the context of a company's overall financial strength. A bank with abundant capital resources is better equipped to remedy its Y2K problems today, as well as cope with any consequences after the year 2000. In contrast, a bank with apparent deficiencies in both its Y2K progress and its financial stability may be at serious risk.

"The main issue is accessibility," Lackey said. "Will people have access to their money? They may not be able to get their hands on it to pay bills after a certain time. It's not going to dry up. It just will be hard to access it."

If people are comfortable with taking some money out before the Year 2000, he said they should do so. " If their comfortable with taking it out of one bank and putting it in a bank they feel more comfortable with, they could do that."

-- Andy (2000EOD@prodigy.net), May 09, 1999

Answers

Various analyses...

http://www.greenspun.com/bboard/q-and-a-fetch- msg.tcl?msg_id=000o3a

-- Andy (2000EOD@prodigy.net), May 09, 1999.

Response to "99% is not good enough it must be 100%[compliance]" - Alan Greenspan

To the contributors of this forum who feel compelled to call our attention to Mr. Greenspan's equable calm, I repeat: he is a skilled obscurantist. You must ask yourself, if you are serious about the issue, whether it is possible that Mr. Greenspan would decide to inform the public of impending difficulties in the banking/securities industry. Is it conceivable that Mr. Greenspan, seeing possible problems relating to data corruption, would tell the public "problems loom for financial industry." Remembering, as you will, that Mr. Greenspan always and everywhere speaks in a highly nuanced language, knowing, as he does, that countless moneyed ears hang on his every construction. If he whispers the codewords that signal inflation, shutters pass through the markets. My feeling is that, bright and omnicompetent as Mr. Greenspan is, his words regarding Y2K are of little diagnostic utility. He is commanded by the pressures of his position to present a figure of public optimism, so as not to precipitate financial disaster. Please, Dismissives (my new word for "pollyannas"), do not use the Fed chair's optimism as compelling evidence that corrupt data is not ruinous to banking: he simply isn't going to tell you. Why would he?

-- Spidey (in@jam.com), May 09, 1999.

Response to "99% is not good enough it must be 100%[compliance]" - Alan Greenspan

Whoops! 'shudders,' not 'shutters' will pass through the market. (Where's that coffee...)

-- Spidey (in@jam.com), May 09, 1999.

The information systems at Regions Bank, Birmingham, AL, are in extremely poor shape. Recently Wachovia looked at the IS mess as part of their due diligence and backed away from a proposed acquisition deal.

BTW, "dismissives," Regions is one of the 25 largest banks in the country. Wonder if they will have a negative effect on the banking industry if they go down?

-- Spook (spook@scared.boo), May 09, 1999.

Response to "99% is not good enough it must be 100%[compliance]" - Alan Greenspan

Spidey, you're an idiot. Alan Greenspan is listened to so carefully because what he says is ACCURATE. He has access to reams of data that YOU don't, and people trust his analysis. He cannot lie to his colleagues, because they are no fools, either. Grow up.

-- Spare us (Kill@spiderman.org), May 09, 1999.

Spook:

Very interesting. Do you have any source for this information? Regions Bank claims to be in excellent shape.

-- Flint (flintc@mindspring.com), May 09, 1999.

That's my feeling too Spidey - why indeed?

-- Andy (2000EOD@prodigy.net), May 09, 1999.

Spare Us, I don't recall Alan Greenspan ever making the statement that money is "safe" in the bank at rollover. He has said "safest," a general term, not synonymous with safe, which he can justify by claiming a belief that thieves will steal your money when you take it out of the bank.

Greenspan has said some very scary things about y2k in a very calm tone of voice. If you can find where he said money will be "safe" in the bank, please point me to the URL.

-- Puddintame (achillesg@hotmail.com), May 09, 1999.

Semantics, with all due respect, puddintame, the fact that he may not have said SAFE is immaterial - it's the impression, the tone of paternal safety, that he is trying to convey that is important. And he's doing a pretty good job so far.

-- Andy (2000EOD@prodigy.net), May 09, 1999.

Sorry puddin, that was addressed to spare us please.

-- Andy (2000EOD@prodigy.net), May 09, 1999.

Flint,

Yes, I have several different internal and external sources which have confirmed this in whole or in part. Unfortunately, I can't name any of them because it would endanger my job and theirs. Needless to say, Regions is not anxious to have this information in the public domain and is trying to counter it. Sorry I can't be more precise, but I need to keep my job. Spook

-- Spook (spook@scared.boo), May 09, 1999.