To the Chief Executive Officers of All State Member Banks, Branches and Agencies of Foreign Banks, Bank Holding Companies, and Edge Corporations in the Second Federal Reserve District:
The Federal Financial Institutions Examination Council (FFIEC), consisting of the Federal Reserve and other federal regulatory agencies, is intensifying efforts to raise the industry's awareness of the risks associated with the approach of the Year 2000. As a consequence, the FFIEC has issued a new Interagency Statement entitled Year 2000 Project Management Awareness, reemphasizing the steps that need to be taken since they were first presented in an earlier FFIEC statement on this subject that was sent to you in September 1996. The new statement also supplements an alert I sent you last month on this subject (Circular No. 10937).
The new FFIEC statement has two appendices: an Examiner Questionnaire and Examination Procedures that are intended to help the agencies assess an institution's, and the industry's, state of preparedness for the Year 2000. They are being provided as part of the Interagency Statement to help financial institutions and service providers understand better the agencies' efforts in this regard.
Since the 1996 statement was issued, the agencies have monitored the progress of financial institutions in addressing the Year 2000 issue. Examiners have included in regularly scheduled examinations a review of the progress being made by many banking organizations with respect to the guidelines contained in the original statement. As a consequence of these reviews and overall monitoring efforts, the agencies concluded that another advisory was necessary to reemphasize the steps that need to be taken to address the risks involved in failing to secure a compliant hardware, software, and support environment for the upcoming century date change. Financial institutions are urged to assure that their vendors and third-party service providers receive a copy of the new Interagency Statement.
The FFIEC's new statement notes that "Mission critical applications should be identified and priorities set for Year 2000 work by the end of the third quarter of 1997." In addition, "for mission critical applications, the federal banking agencies strongly encourage the industry to assure that programming changes are largely completed and that testing is well underway by December 31, 1998." It is also noted in the statement that the banking agencies will conduct supervisory reviews of all financial institutions for Year 2000 preparedness by the middle of 1998. The Interagency Statement, as well as other information pertaining to the Year 2000, are available on the FFIEC Internet web page and via a FAX BACK phone service at 888-882-0982.
The FFIEC statement and its two appendices are intended primarily for use at U.S. banks and domestic information service providers. Some questions or procedures may not apply directly to a U.S. branch or agency of a foreign bank. Nevertheless, the banking agencies expect each U.S. branch or agency of a foreign bank to address Year 2000 issues with its head office and determine responsibility and accountability for the identification of systems that need to be modified. In this regard, the U.S. bank supervisors' expectation of a U.S. branch or agency is comparable to that of a U.S. bank that is heavily dependent on a third-party service provider.
Should you or your staff have any questions regarding the statement, questionnaire, or examination procedures, please contact, at this Bank, George Juncker, Vice President, Bank Supervision Group or Thomas W. Wines, Examining Officer, Advisory and Technical Services Function.