Magazine article American Banker

FDIC Inspector Casts Doubt on Banks' Year-2000 Readiness

Magazine article American Banker

FDIC Inspector Casts Doubt on Banks' Year-2000 Readiness

Article excerpt

WASHINGTON -

Federal Deposit Insurance Corp. examiners are giving some banks a higher year-2000 rating than they deserve, the agency's inspector general has concluded.

Regulators are inspecting every bank to determine whether their computers are ready for the year-2000 change. The FDIC has said that 97% of the institutions it supervises had made "satisfactory progress" as of Feb. 28.

But an internal FDIC report-recently obtained by the House Banking Committee-casts doubt on some examiners' judgments. House Banking has scheduled a hearing April 13 to discuss the industry's preparation.

FDIC Chairman Donna A. Tanoue insisted in an interview Wednesday that the agency's year-2000 supervision program is effective. She described the inspector general's recommendations as "refinements."

"These are ways to improve an already sound supervisory program," she said. Ms. Tanoue also noted that every bank's year-2000 report is already checked by at least two FDIC managers before becoming final.

Inspector General Gaston L. Gianni Jr. agreed.

"I'm not a messenger crying that there's a problem of great proportion out there. I'm a messenger that says, 'Here are some opportunities for you (the FDIC) to strengthen your approach,'" he said in an interview.

The inspector general's office, as part of its routine work, visited several FDIC field offices in January and February to review year-2000 exam reports. It is unclear exactly how the sample of 89 reports was selected, but the choice was not random.

Mr. Gianni said that an unusually large number of the banks had safety and soundness problems, and that generalizations about the quality of FDIC year-2000 exams could not be reached.

The findings nevertheless led the inspector general to recommend extensive changes in year-2000 exams.

Ms. Tanoue said the report's recommendations would be adopted, including an additional review of every bank's year-2000 exam report and supporting documentation. …

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