Year 2000 Supervisory Review Plan Phase II (July 1998 - March 1999)
August 20, 1998
Circular No. 11084

To the Chief Executive Officers of All State Member Banks, Bank Holding Companies, Edge and Agreement Corporations, and State-Chartered Branches and Agencies of Foreign Banks in the Second Federal Reserve District; and to Related Vendors Serving These Organizations:

The Federal Reserve recently issued plans for continued monitoring of the Year 2000 compliance efforts of financial institutions and certain service providers during the second phase of its Year 2000 supervision program. The letter, dated June 23, 1998 (SR 98-17), summarizes the Federal Reserve's Supervisory Review Plan for assessing Year 2000 compliance for July 1998 through March 1999.

Phase II calls for examiners to focus attention on several key aspects of institutions' Year 2000 efforts, including testing, contingency planning and compliance with key milestones established by various FFIEC guidelines. The FFIEC Year 2000 Phase II Workprogram provides updated examination guidance, with a particular focus on these key areas.


Federal Reserve Bank of New York - Phase II Implementation

To implement the second phase of Year 2000 reviews, the Federal Reserve Bank of New York has developed an examination program that will be conducted in two parts. Part 1 of the program, to be conducted between August 1998 and December 1998, will focus on Year 2000 issues related to credit/counterparty risk and vendor/service-provider management, as well as the institution's project performance to date, with a particular emphasis on the institution's ability to meet key compliance dates. Examiners will also follow up on issues identified during the first round of reviews. These reviews will be conducted on-site by examiners specifically trained in Year 2000 reviews; some of the reviews will be done as part of regularly scheduled examinations, but most will be done as special Year 2000 target reviews.

To prepare for these Part 1 reviews, a preliminary version of a Year 2000 information request is available for information purposes only. FRBNY will be contacting you shortly to schedule these on-site reviews. A finalized version of the information request will detail the specific information required by the examiner and interviews arranged with particular individuals with whom the examiner may want to meet. Findings from these targeted reviews and an updated Year 2000 rating will be provided to management of the institution upon completion. As noted in previous guidance, the results of an institution's Year 2000 review should be treated as confidential supervisory information and should not be made public, discussed with another institution, or otherwise shared with any outside parties.

Part 2 of the FRBNY's program, to be conducted between December 1998 and June 1999, will focus on Year 2000 efforts related to testing and contingency planning, as well as any issues identified during Part 1 reviews. Again, these reviews will be conducted on-site by Year 2000-trained examiners. For the Second Federal Reserve District, Part 2 reviews will be completed before March 31, 1999, for all state member banks, "top 50" bank holding companies, branches and agencies of foreign banks with significant operations, and service providers; reviews for the remaining institutions will be completed during the second quarter of 1999. Additional information on Part 2 of our Year 2000 reviews will be forwarded to institutions in the coming months.

The Federal Reserve Bank of New York continues to view Year 2000 as a key challenge for financial services institutions and our examination efforts will continue to focus on organizations' progress in addressing the risks posed by the century date change. If you should have any questions about the FRBNY's Phase II Year 2000 supervision program, please contact Sarah Dahlgren, Vice President, Bank Supervision Group, or Ira Adler, William Francis, or Joseph Galati, Examining Officers, Advisory and Technical Services Function (respectively).