A representative of KPMG Peat, Marwick, the international managerial firm, testified before the House Subcommittee on Technology on November 4. He described the problems on of the firm's clients has had in getting international financial institutions to acknowledge the problem, let alone fix it.
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While many domestic organizations have begun to address the issue and implement the necessary changes, many companies and governments outside the U.S. are still unaware of the implications and immense problems that could arise if this issue is not addressed.†
To better illustrate this, I would like to take you through a live example of one of our Wall Street clients and their experiences in addressing the Year 2000 issues in their various offices around the globe. The client is a major U.S. financial services firm and well known throughout the world.†
This client began to address itís Year 2000 issues over a year ago. They began with an internal awareness campaign to raise the issues over the costs, consequences and concerns surrounding the Year 2000 work. This was something that took their executive leadership through the stages we commonly see in this Year 2000 phenomenon of ignorance, to denial, to sticker shock (over the price to fix), to a commitment to action. However, when they began to roll out this project to their offices in Europe they found a distinct distraction in the form of the European Monetary Unit (EMU) conversion. In London their staff were studying the effects of EMU conversion if Britain joined this year or delayed to 2002, and other various scenarios. While they were aware of the need to fix Year 2000 they were slow to mobilize and react compared to their colleagues in New York. As we moved further into Europe, to France, Germany, Italy we found even less concern for the Year 2000 issues and much more focus on EMU because of itís 1999 impact. Eastern Europe and the countries in the former Soviet Union were also a great concern. We learned, for example, that The Bank of Kazakhstan, which is the custodial bank for trades in Kazakhstan, may not be able to be Year 2000 compliant.
In April of this year, when we went to their Asia Pacific operations, mainly in Australia, Singapore, Hong Kong, and Tokyo, we were surprised at the level of awareness of the problem in general; although the clientís employees knew of the problem from their colleagues in New York, they told us that their governments, central banks and regulators were not aware of its depth and breadth.†
In fact, when some of us requested to meet with the Bank of Japan to discuss their progress on the Year 2000 and any regulatory activities they had or were contemplating to implement, our request was denied several times. This was taken very seriously by our client because of the dependence on the Bank of Japan by trading companies.†
Later when we visited with their offices in Sao Paulo, Buenos Aires, and Mexico City we were faced with a complete lack of knowledge or concern and were led to understand that the major banks and government agencies in those countries had barely begun to recognize, let alone address the problem.