Magazine article American Banker

FDIC under the Gun to Assess Bank Efforts on Year-2000 Bug Fast

Magazine article American Banker

FDIC under the Gun to Assess Bank Efforts on Year-2000 Bug Fast

Article excerpt

The Federal Deposit Insurance Corp. has less than 100 business days to examine how more than 4,000 banks are handling the year- 2000 problem.

That's at least 40 banks a day.

What's worse, FDIC examiners must return to the more than 2,000 banks already evaluated because the General Accounting Office found the agency's first reviews inadequate.

Michael J. Zamorski, deputy director of the FDIC's supervision division and head of its year-2000 task force, says the agency's specially trained examiners will meet their June 30 deadline.

"Even though we have 6,200 institutions, they tend to be smaller and much simpler organizations than the larger, complex organizations" that the Office of the Comptroller of the Currency and the Federal Reserve Board oversee, said Mr. Zamorski.

But FDIC's examiners will have to pick up the pace. The agency is just one-third of the way through its exams.

By comparison, the Comptroller's Office and the Federal Reserve have completed about half their year-2000 exams.

As of Dec. 31, the Comptroller's Office had visited 1,255 of the 2,600 national banks it supervises, while Fed examiners had evaluated 920 of its 1,849 state banks.

Additional questions recommended by the GAO will only add to the year- 2000 burdens on FDIC examiners.

The current on-site evaluation procedures-used by all bank regulators, not just the FDIC-require examiners to ask 15 to 41 questions about each bank. Some are broad queries that require significant research time, and place a premium on the examiner's judgment.

For example, just one question asks the examiner to determine if the bank has:

identified risks associated with licensing and maintenance agreement protections in third-party software contracts;

determined whether data processing outsourcing agreements have year- 2000 maintenance obligations;

considered leap years in its contract reviews;

established a process to certify that vendors and products are year- 2000 compliant. …

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