Financial Update (January-March 2000)
Smooth Rollover for Century Date Change
TMs worked, the public did not withdraw their life savings from their banks and the banking system hummed along as if the rollover to 2000 was like any other weekend. The planning and preparations paid off, and with the exception of a few very minor glitches, the century date change was a smooth event.
Mostly quiet on the Fed front
Beginning Dec. 29 and running through Jan. 7, Federal Reserve employees monitored not only Fed operations but also the systems at financial institutions in their respective districts. Fed employees also kept an eye on other critical operations, such as power and telecommunications, that if unavailable could have affected the Fed's ability to provide services.
The Fed's preparations were not unlike the efforts of other financial regulators and individual banks, thrifts and credit unions. Through these efforts, the Fed navigated the rollover without any major problems, as did the operations of the U.S. financial system.
"We were very pleased with the transition to 2000," said Patrick K. Barron, Atlanta Fed first vice president and chief operating officer. "All of the Fed's preparations and the preparations of the banking industry really paid off. While an effort of this size had not been undertaken before, it shows how successful we can be in preparing for a large-scale event, like the century date change, by working together with other regulatory agencies and working closely with the banking industry."
Demand for cash by the public was an unknown prior to Y2K, but through advanced preparations banks, thrifts and credit unions were able to maintain sufficient inventories just in case usage was higher than anticipated. After the rollover, most banks that had stocked up on cash for Y2K began to return a portion of that inventory to the Federal Reserve. According to Barron, this process also progressed efficiently.
Leap year and other testing
The next Y2K-related event is the leap year date, Feb. 29. Leap year dates appear on the calendar every four years but are omitted in years ending in 00, except for years, like 2000, that can be divided evenly by 400. Because of this anomaly, some computers may not expect a leap year date in 2000 and might skip ahead to March 1. The Fed and individual banks have tested these critical dates and customer applications using dates during this timeframe. The Fed also plans to monitor Fed operations and other services during the leap year date, and no problems are expected.
If nothing had been done
With the transition to 2000 having gone so smoothly, some have questioned the expense, both in new hardware and software investments and personnel time, devoted to solving the Y2K problem and have wondered if maybe such efforts were overdone or even necessary.
"The smooth transition to 2000 should not lead people to believe that the entire effort was uncalled for," Barron said. "In fact, I would hope that everyone instead realizes the potential problems in the banking industry that could have occurred if regulators, institutions and even banking customers were not prepared for the century date change. Without these advance preparations, there is no question that the outcome would have been dramatically different."
Additionally, Barron said that the Fed and the banking industry have gained long-term benefits from Y2K preparations, including the implementation of more advanced technology, the development of better contingency plans and the establishment of better communication procedures.