Circular
Interagency Statement on Testing for Year 2000 Readiness
April 27, 1998
Circular No. 11052

To the Chief Executive Officers of All State Member Banks, Bank Holding Companies,
Edge and Agreement Corporations, and Branches and Agencies of Foreign Banks
in the Second Federal Reserve District, and Related Information Systems Service Providers:

The FFIEC member agencies are continuing to monitor the progress of financial institutions in addressing Year 2000 issues and to provide guidance that assists their efforts to prepare for the Year 2000. Accordingly, the FFIEC has issued the sixth in a series of policy statements addressing safety and soundness issues pertaining to the Year 2000. The advisory, entitled "Guidance Concerning Testing for Year 2000 Readiness," describes the FFIEC's expectations regarding the scope and management of financial institutions' Year 2000 testing programs.

The advisory emphasizes the role of financial institution boards of directors and management in the important testing phase of Y2K preparations. It specifies that financial institutions should develop and implement written testing strategies and plans for internal and external systems, placing priority on the testing of mission-critical systems. It also discusses testing with service providers, software vendors and other third parties. Finally, the advisory addresses the need for financial institutions to verify the testing process.

The advisory identifies key milestones and testing methods financial institutions should use in preparing systems and applications for Year 2000 readiness. The FFIEC expects financial institutions to have commenced testing of internal mission critical systems by September 1, 1998, and to have completed the testing of both internal and external systems by June 30, 1999. In the New York Federal Reserve District, financial institutions providing correspondent, clearing, or other services to large numbers of other financial institutions should be largely completed with their external testing with other similar institutions by December 31, 1998.

Financial institutions may choose to forward a copy of the relevant Interagency Statement to their customers, vendors and third party service providers.

Should you or your staff have any questions regarding the statement, please contact, at this Bank, Sarah Dahlgren, Vice President, Bank Supervision Group, or William Francis or Thomas Wines, Examining Officers, Bank Supervision Group (respectively).