"Major banks raise cost estimates for upgrades to fix Y2K problem"

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This article on MSNBC's Web site orginally comes from the Wall Street Journal:



IN QUARTERLY REPORTS filed with the U.S. Securities and Exchange Commission recently, five of the nations 15 largest banks disclosed it will cost more to fix the problem than they estimated just three months earlier. The spending increases, while not expected to hurt earnings, are the first in six months and a sign that banks are encountering unanticipated expenses as they race to beat the deadline.


-- Linkmeister (link@librarian.edu), August 20, 1999


[Fair Use: For Educational/Research Purposes Only]

Major banks raise cost estimates for upgrades to fix Y2K problem

By Rick Brooks


Aug. 20  For some of the nations banks, the cost of upgrading their computers to overcome the year-2000 bug continues to climb, even as banks enter the home stretch in completing the job.

IN QUARTERLY REPORTS filed with the U.S. Securities and Exchange Commission recently, five of the nations 15 largest banks disclosed it will cost more to fix the problem than they estimated just three months earlier. The spending increases, while not expected to hurt earnings, are the first in six months and a sign that banks are encountering unanticipated expenses as they race to beat the deadline.

Citigroup Inc., the largest U.S. bank, said it expects to spend about $950 million, up 5.6% from its previous estimate. Chase Manhattan Corp., ranking third in assets, estimated its bill for this year alone at $158 million, up 24% from the previous estimate of $127 million. Wells Fargo & Co., the nations seventh-largest bank, expects to spend $325 million, a 3.2% increase from its previous estimate.

In all, the nations 15 biggest banks now project a combined year- 2000 bill of almost $3.51 billion, 2.6% more than the $3.42 billion estimated on March 31. The figures exclude Bankers Trust Corp., which was acquired by Deutsche Bank AG in June.


Although the latest jump is barely one-fourth the 10% increase in combined estimated spending from last years second quarter to the third quarter, it is another sign that many banks underestimated the size of the problem. Overall, 12 of the top 15 banks have boosted their estimated year-2000 spending at least once in the past year.

They come up with a figure and throw in a fudge factor, but then still exceed the spending estimates, said Martin Weiss, chairman of Weiss Ratings Inc., a Palm Beach Gardens, Fla., company that rates companies for year-2000 readiness. He noted, though, that banks generally are in better shape than most industries because regulators are beating [banks] over the head. Earlier this month, regulators said 99% of the nations banks, thrifts and credit unions had completed year-2000 testing.

One new reason costs are rising is that some banks are trying to eliminate customer concerns that the date change could play havoc with essential banking tasks such as processing checks or dispensing cash. For instance, Wachovia Corp. partly cited customer communication for a 5% jump in its expected spending, to $84 million. Wachovia said it launched public awareness programs to urge jittery customers to leave their money in the bank.


With almost all banks are now finished with the replacement and testing of outdated equipment, more attention is being devoted to making sure important bank customers and suppliers have addressed the problem. For example, KeyCorp, which now puts its spending at as much as $50 million, instead of between $45 million and $50 million, has been surveying big borrowers to assess the potential credit risk of those who arent prepared. We have found no problems with our borrowers, and theyre ready to go, a KeyCorp spokesman said.

Huge computer-upgrading expenses already are built into the banks budgets, so the most recent increases arent expected to bruise earnings anytime soon. Still, much of the $3 billion spent so far by the 15 biggest U.S. banks has been diverted from other technology- related projects, which could delay the rollout of new products and hurt profits years from now.

It really depends on the size and scope of the institution, said Joseph Stieven, a banking analyst at Stifel Nicolaus & Co. in St. Louis. There are some institutions that might have cut [other] things to the bone in order to meet year-2000 expectations.


Among banks that are spending more to meet the year-2000 deadline, Chase forecasts a total bill of $394 million, up 8.5% from $363 million in May, partly due to bringing in outside experts to double- check upgrades already made by Chase employees, a spokeswoman said. That inspection uncovered a small number of errors, which were quickly fixed, Chase added.

Wells Fargo said it is making sure that equipment replaced and tested recently continues to run smoothly. A Citigroup spokesman couldnt be reached for comment, and the companys quarterly report didnt indicate why its costs increased.

U.S. Bancorp said it now expects to spend less than $40 million on the year-2000 bug, compared with its previous estimate of less than $50 million. We dont have the same level of complexity that other institutions do, a spokeswoman said.

Copyright ) 1999 Dow Jones & Company, Inc. All Rights Reserved.

-- Linkmeister (link@librarian.edu), August 20, 1999.

But wait!!! --on tv the other day, i thought they'd fixed the problem

"LONG AGO"....

amazing. how america doesn't get this stuff, is just amazing. it's truly a media matrix.

-- Super (slfsl@yahoo.com), August 20, 1999.

While I agree Super,

At least one of the banks said that they had increased costs for consumer outreach.



-- nothere nothere (notherethere@hotmail.com), August 20, 1999.


The quote about being fixed long ago was from this segment on the CBS evening news:

[Fair Use: For Educational/Research Purposes Only]


The Y2K Dash For Cash

* Contingency Plans Are In Place

* Banks Claim Their Computers Are Ready

* But People Believe Cash Will Be Short


Wednesday, August 18,1999 - 08:25 PM ET

(CBS) The U.S. Treasury has begun printing an extra $50 billion for Y2K emergencies.

The money is being cut, counted and bundled for delivery to every branch bank in America, plus in several secret storage sites in the event more is needed.

CBS News Correspondent Jim Stewart explains what else is in store in his "Eye On America" report.

---------------------------------------------------------------------- ----------

Alarmed by doomsday books urging everyone to sock away thousands in cash, the Federal Reserve and banks are planning for the worst. Every armored car in America was booked months ago for Y2K weekend cash deliveries. Banks have canceled vacations, extra guards have been added, and already there are signs of some panic withdrawals.

"I had one financial institution tell me that a little old lady came in and withdrew $90,000 - closing her account out - and she was going to keep it at home with her," said Dan Connelly, president of Armored Courier Service.

Texas Banking Commissioner Catherine Ghiglieri mentioned another case: "I was told that a group of companies was going to pull one month's cash out of the banks. And I said, 'Where are you going to put that?' and 'Why are you going to do that?'"

The problem isn't computers. Banks worked out the bugs in those a long time ago. Bankers say the real problem now is people. Despite every reassurance, some people still believe that come the millennium, everything, including their bank accounts, will be shut down.

And what bankers really fear is that, for some reason, an ATM machine somewhere might not work on Saturday New Year's Day and start a panic run on the banks reminiscent of the Great Depression. Hence the extra cash.

Alexander Boyle, vice chairman of Chevy Chase Bank in Maryland, said that if the unthinkable did happen and suddenly there is a line of people snaking out the front door, he has a plan. "We have an armored car service prepared to deliver additional amounts of cash to each branch if necessary."

But there are other potential problems. The FBI and banks are already briefing senior citizens on the danger of being robbed at year's end.

And that's not to mention the pain in the neck it will be next January to count and return that $50 billion to the Federal Reserve, all 18 million pounds of it.

For more Y2K information, go to the FDIC Web site.

And for other Y2K government links, click here.

Copyright 1999, CBS Worldwide Inc., All Rights Reserved.


-- Linkmeister (link@librarian.edu), August 20, 1999.

consumer outreach = SPIN = church sermons !!


-- Ray (ray@totacc.com), August 20, 1999.

The Ottawa Citizen also had an article about Canadian contingency plans:

"Central bank hoards cash for Y2K Don't pull out savings, all will be well, Bank of Canada says."

Some eye-catching quotes:

"The Bank of Canada is hoarding cash in its vaults in preparation for any Y2K panic, but is warning individual Canadians against doing the same."

"Consequently, the bank is taking action in 1999 to significantly increase the inventory of banknotes.

"Additional banknotes are being printed, and old notes that would otherwise have been destroyed are being stockpiled," it said.

This last one raises an intriguing question: will we know our government has run out of money when a bunch of old notes show up in circulation?

-- Rachel Gibson (rgibson@hotmail.com), August 20, 1999.

Taken from "Computer Glossary for Accountants and Bankers", published 1972:

"One of the banks which has heavily computerized and expanded its total customer services operations in the First City National of New York City. Citibank has gone operational with 13 computer systems recently installed in its new office building. ... The transfer of these 13 computer systems is believed to be one of the largest moves of electronic data processing equipment ever made".

I guess it seemed like a good idea at the time.

-- Amy Leone (leoneamy@aol.com), August 20, 1999.

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