To the Chief Executive Officers of All State Member Banks in the Second Federal Reserve District:
The Board of Governors of the Federal Reserve System and the other federal banking agencies have adopted and published in the Federal Register new "Interagency Guidelines Establishing Year 2000 Standards for Safety and Soundness" (pdf - 59kb) ("Guidelines") for insured depository institutions, including state member banks. The Guidelines are issued under section 39 of the Federal Deposit Insurance Act (the "FDI Act"), and are effective as of October 15, 1998.
The Guidelines incorporate important elements of eight already issued FFIEC guidance papers in the areas of Year 2000 project planning, renovation, testing, contingency planning, and the impact of the century date change on customers. They provide the Board of Governors and the other banking agencies with another enforcement tool to address serious Year 2000 deficiencies at the banks, thrifts, and credit unions they supervise. Under section 39 of the FDI Act, the Board may direct a state member bank that is not in compliance with the Guidelines to submit an acceptable corrective action plan or comply with such a plan, without initiating an administrative enforcement proceeding. If the Board finds that a state member bank fails to submit an acceptable plan requested by the Board or fails to comply with a plan that has been deemed acceptable, it can issue, pursuant to section 39, a public "safety and soundness" order requiring the bank to correct the deficiency.
In appropriate circumstances, this Reserve Bank will consider the use of informal and formal enforcement actions to address critical Year 2000 compliance deficiencies at state member banks, including the use of memorandums of understanding, cease and desist orders, and now, with the adoption of the new Guidelines, "safety and soundness" orders issued pursuant to section 39 of the FDI Act.
Note that, in the Federal Register notice, comments on the Guidelines have been invited. Comments should be submitted by December 14, 1998, to the Board of Governors, as specified in the notice.
Questions regarding Year 2000-related compliance obligations can be directed, at this Bank, to Sarah Dahlgren, Vice President, Bank Supervision Grou, or Ira Adler or Joseph Galati, Examining Officers, Advisory and Technical Services (respectively).