Financial Update (October-December 1998)


Cover Story

Credit Unions

Guynn Speech

Treasury Securities on the Internet

New Quarters and $20 Bills

EFT 99


Year 2000

Did You Know?

Data Bank

The Docket

Year 2000

Contingency Planning and Customer
Awareness Are Key in Y2K Efforts

F inancial institutions are being urged to make their Year 2000 New Year's resolutions early. In efforts to ensure that financial institutions and their computer systems are ready for the new millennium, federal bank regulators are working with these institutions on their contingency planning and customer awareness efforts.

These measures, which are part of regulators' goal of ensuring the overall safety and soundness of the U.S. financial system, are being directed by the Federal Financial Institutions Examination Council (FFIEC). The FFIEC is made up of the Federal Reserve, the Office of the Comptroller of the Currency, the Federal Deposit Insurance Corporation, the Office of Thrift Supervision and the National Credit Union Administration.

Evaluating Contingency Plans

Preparedness is a key message that regulators have stressed to financial institutions. Part of being prepared calls for each institution to examine its own internal computer systems and its vendors' systems and then identify particular problem areas to address.

In a proactive step, federal regulators earlier this year also mandated that institutions develop detailed contingency plans to provide assurance that their critical functions will continue if one or more computer systems fail.

Through an interagency statement, the FFIEC outlined four phases of contingency planning for institutions:

  • developing organizational planning guidelines to identify the institution's core business processes and prioritize business risks,
  • completing a business impact analysis on each core business and defining and documenting Year 2000 failure scenarios,
  • preparing a contingency plan for each core business process that identifies contingency options and implementation modes, and
  • validating the institution's contingency plans through an independent review of the plans and periodic testing.

Customer Awareness Efforts

Financial institutions' customers are looking for assurances that their institution is taking steps to ensure a smooth transition to the Year 2000. The FFIEC recommended that institutions determine the types of customers that they should communicate with on the century date change issues and develop ways to reach these customers. The FFIEC's recommendations include

  • providing brochures or other written disclosures in monthly or quarterly statements,
  • establishing toll-free hotlines for customer inquiries,
  • holding seminars to discuss the Year 2000 problem and actions the institution is taking to prepare for the century date change, and
  • developing Internet sites to disseminate information to customers.

In developing customer awareness programs, financial institutions should consider which issues might interest customers and keep customers informed about these issues and what they should do if problems arise during the transition to the new millennium.


On the Millennium


Relationships with Vendors

The Federal Financial Institutions Examination Council's statements (on Year 2000 issues) have underscored the importance of the Year 2000 problem for banks. In many instances, banks have used the power of these statements as an effective lever to encourage earlier compliance schedules by vendor companies that are beyond bank supervisors' umbrella. This leverage has produced improved vendor delivery schedules and has effectively given banks more time to perform Year 2000 certification tests and resolve any issues arising from these tests.

— John R. Mohr, executive vice president of
the New York Clearing House Association
Congressional testimony, June 23, 1998

Fed Operations

The Fed is far along in its internal Y2K work. As a result, we are in excellent shape, having begun rewriting all of our major systems five years ago — well ahead of most others. To date, the Fed has modified or replaced every piece of software for all of our major internal applications and those that interact with our customers and we are now ready for testing.

— Patrick K. Barron, first vice president of
the Federal Reserve Bank of Atlanta
Interview with the Atlanta Journal and Constitution,
July 15, 1998

For more information on the century date change, see the Federal Financial Institutions Examination Council's site on the World Wide Web at This site has links to the century date change efforts of the five U.S. banking regulators.

Year 2000 Readiness Disclosure