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Summary and Comments

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1998-04-24 10:10:20


Dates for You to Contact Your Bank



The Federal Financial Institutions Council (FFIEC) is the joint regulatory/advisory body that deals with U.S. thrift institutions. It has published deadlines for y2k compliance. What the sanctions are for missing the deadlines is never stated clearly.

Few or no banks will meet these deadlines, so there will be no major negative sanctions imposed by any regulator. To impose them would mean alerting the public to the fact that the vast majority of banks are threatened with a disaster, which happens to be the case. The bank runs would then begin. No bank regulatory agency will risk taking any public action that might start bank runs.

In any case, the FFIEC has no authority over the 200,000 or so banks in the world outside of U.S. jurisdiction. In a world with shared bank data -- noncompliant data -- the FFIEC is little more than a public relations outfit. It's all for show. It is powerless to fix the problem. But, then again, so is every other public institution. The y2k problem is systemic. It cannot be fixed.

The whole y2k regulatory process is a bureaucratic charade in preparation for the imposition of emergency banking regulations in 1999 when the banks fail to meet any of these deadlines, and bank runs threaten the world economy and, most important from the bureaucrats' point of view, the payment of taxes. This charade keeps politicians and depositors calm in the interim.

If media reporters were really interested in finding out whether y2k repairs in the banking system can possibly save the system, they would use this list of deadline dates to contact a dozen major money center banks the day after each deadline. They would ask for a statement in writing assuring the public that the latest FFIEC deadline has been met by the institution in question. But they aren't interested, so it won't be done. The charade will go on longer.

Anyone with a bank deposit who refuses to send a copy of the original FFIEC document (not this page) to his local bank when each date arrives, and ask for a written statement regarding the bank's compliance, is playing the ostrich, unless he is steadily taking cash out of his bank. (If he is, he should never mention y2k to anyone in the bank. He should keep a low profile.)

For the remnant that cares to be informed, here are the dates.

* * * * * * *

To: The Board of Directors and Chief Executive Officers of all federally supervised financial institutions, examining personnel and senior management of each FFIEC agency, and all service providers and software vendors who provide services or software to federally supervised financial institutions.


The Federal Financial Institutions Examination Council (FFIEC) has issued several statements on the Year 2000 problem. These interagency statements address key phases in the Year 2000 process, specific responsibilities of the board of directors and senior management with regard to the business risks, the due diligence process in connection with service providers and software vendors, and risks associated with financial institution customers. The FFIEC considers testing to be the most critical phase of the Year 2000 readiness process. Failure to conduct thorough testing may mask serious remediation problems. Failure to properly identify or correct those problems could threaten the safety and soundness of the institution.


The purpose of this guidance is to describe FFIEC expectations regarding the Year 2000 testing efforts of financial institutions. This guidance identifies key milestones and testing methods for financial institutions to use to prepare their systems and applications for the Year 2000.


Each financial institution is unique and management should determine the best testing strategies and plans for its organization taking into account the size of the institution, the complexity of its operation, and the level of its own business risk exposure to the Year 2000. Ultimately, each financial institution is responsible for ensuring its readiness for the Year 2000. The FFIEC expects financial institutions to meet key milestones in their Year 2000 testing process. Financial institutions should develop and implement a written testing strategy and plan to test both internal and external systems (including hardware, software, and environmental systems). Financial institutions should test mission-critical systems first . The plans should include, at a minimum, the following elements: testing environment, testing methodology, testing schedules, human and financial resources, critical test dates, documentation, and contingency planning. Management should ensure that qualified sources verify the testing process.

Key Milestones for Testing Phase

The FFIEC expects financial institutions to meet the following key milestones in their Year 2000 testing process. On or before:

June 30, 1998 Institutions should complete the development of their written testing strategies and plans.

September 1, 1998 Institutions processing in-house and service providers should have commenced testing of internal mission-critical systems, including those programmed in-house and those purchased from software vendors.

December 31, 1998 Testing of internal mission-critical systems should be substantially complete. Service providers should be ready to test with customers.

March 31, 1999 Testing by institutions relying on service providers for mission-critical systems should be substantially complete. External testing with material other third parties (customers, other financial institutions, business partners, payment system providers, etc.) should have begun.

June 30, 1999 Testing of mission-critical systems should be complete and implementation should be substantially complete.


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