BUSINESS WEEK (March 2) repeats the Party Line of the American media: big banks are on schedule to fix y2k; small banks are not.
At present, there is no verified public proof that there is one bank on earth that is 2000-compliant. The most y2k-advanced large U.S. bank (# 15 in assets) is the Bank of Boston, and it is not compliant. But we are told, again and again, that big banks -- and big firms in general -- will make it because "they have the resources." This assumes that having money to spend and programmers on the payroll will do the trick. There is little proof of this for individual organizations, and no proof for entire systems.
But the Party Line is crucial. People must believe that big systems will survive. The day they no longer believe this, the bank runs will begin.
That would be bad for media's income.
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Nuclear power plants, of course, pose an especially worrisome problem. While their basic safety systems should continue to work, other important systems could malfunction because of the 2000 bug. In one Year 2000 test, notes Jared S. Wermiel, who is leading the millennium bug effort at the Nuclear Regulatory Commission, the security computer at a nuclear power plant failed by opening vital areas that are normally locked. For that reason, the NRC is in the process of issuing a letter requesting confirmation from utilities that their plants will operate safely come Jan. 1, 2000. Given the complexity and the need to test, ''it wouldn't surprise me if certain plants find that they are not Year 2000-ready and have to shut down,'' says Wermeil.
By contrast, the securities industry, big banks, and the Federal Reserve have been taking Year 2000 seriously for years. Chase Manhattan Corp. is spending $250 million on the problem, while Wells Fargo & Co. will ultimately deploy 400 people to fix Y2K. Later this year and next year, Wall Street firms will run an industrywide test simulating the rollover to Jan. 1, 2000.
But smaller banks are lagging way behind. According to an extensive new survey from accounting firm Grant Thornton, community banks are only spending an average of $7,000 each on the bug. ''They are not taking it seriously enough,'' says Diane Casey, national director of Thornton's financial-services practice. Only 44% have tested their vaults and other time-sensitive security systems for Year 2000, raising the possibility that they will either be locked out or that doors and vaults will spring open on New Year's Day, 2000.
PREOCCUPIED IN ASIA. These smaller banks, which typically outsource check processing and other computer-dependent operations to outside service providers, are assuming that those companies will handle the problem. But bank-service providers themselves are faced with the tough prospect of fixing their own systems. If outside vendors don't get the problem corrected, ''banks are then in a real bind,'' says Mark L. O'Dell, director of the bank-technology division at the Office of the Comptroller of the Currency.
Another danger to the U.S. financial system comes from abroad. European and Asian banks are far behind their U.S. counterparts. In Europe, banks are focusing on the enormous task of converting their financial programs to handle the euro, rather than fixing Y2K. ''Western Europe will not achieve Year 2000 compliance for even 65% of the applications that need Year 2000 repair,'' says software expert Jones.
And the situation in Asia may be even worse, since banks in those countries are more preoccupied with surviving the current economic threat than worrying about Year 2000. ''Y2K could trigger a whole new round of country debt negotiations,'' warned Philip Kozloff, a member of Citibank's Credit Policy Committee, speaking at a Securities Industry Assn. conference in January. Adds Yardeni: ''If foreign banks fail to comply, that could have a serious impact on world trade.''