Spotlight Boston

October 5, 1998

Banking effort not enough to solve Y2K

by Bill Burke/BusinessToday staff

When dozens of the nation's largest banks banded together last week to collectively assure the public that their money would be safe despite the coming Year 2000 computer problem, many people breathed a sigh of relief.

Others, however, are still expressing concern.

A list of public-relations-crafted focal points isn't going to make the Y2K problem any easier to solve, they say.

Early last week, forty banks published a "Top 10 Awareness" list with information for consumers about banks, money, and the Millennium Bug.

According to organizers, the list was put together to urge consumers to take a common sense approach to their financial routines; recognize that banks are closely monitored; and be aware that the banking industry is considered to be a leader with respect to year 2000 preparation efforts.

And while some Y2K watchdogs are hailing the banking industry, others are wondering what all the crowing is about.

"Claims of the banking industry being ranked first in preparedness is true, but being first in Y2K preparedness is relative," said Michael Harden, author of "Failure is Not An Option: Declaring War on the year 2000 Problem" and president and CEO of Century Technology Services. "When you look at how far behind everyone is, being first isn't such a big deal."

The banking consortium included some of the country's most respected financial institutions, including BankBoston - known throughout the industry for tackling its Y2K work aggressively and effectively - Fleet Financial Group, NationsBank and Norwest Corp.

The list is made up of "awareness points," including: many banks are working together to share lessons learned in an effort to help solve the year 2000 problem across the industry, the century date change does not affect deposit insurance coverage and federal banking regulators have issued extensive guidance on year 2000 issues to all banks.

Fine, the Feds are issuing guidelines. Why, then, are they so reluctant to let everyone know where they are in terms of Y2K work?

"The FDIC sent out word that banks should not disclose Y2K information," said Leland G. Freeman, vice president of Strategic Relations at Framingham, Mass.-based The Source Recovery Co.

That, and whether the FDIC loosens up or not, they have no say over the myriad of other factors that could affect transactions.

"A bank may spend hundreds of millions of dollars to achieve compliance, only to by impacted by disruptions caused by external events such as power outages, failures of telecommunications systems, and the inability to handle data from other banks which are non-compliant," Harden said. "A further factor is the problem of embedded systems, which most financial institutions are only now beginning to address. Embedded systems throughout the facility could fail, causing severe disruptions in the ability of the bank to function."

Yet the banks taking part are not exactly mom-and-pop operations.

"These are all formidable banks," Freeman said. "It makes you wonder if there is a genuine concern and if this is a genuine response."

Long time Y2K watchdog Peter De Jager praised the effort, saying the Millennium Bug will only fulfill its chaotic potential if corporations fail to act.

Still, it's going to take a nation-wide effort to avoid technological headaches because Y2K is no longer a technological problem - it's a business problem that doesn't care if there are offices full of PCs.

Says Harden: "I know of one bank that ran a contingency drill where the programming staff would relocate on a moment's notice to another site elsewhere in the US. When the time came for the drill, they picked up the tapes and other important documentation, and headed off to the airport. When they got there, they found out that only a few of the seats on the plane were available. It took them five days of putting people on various airplanes to get them all to the back-up site location. When they got there, there weren't enough hotel rooms for everybody, or rental cars. The disaster plan turned out to be a disaster. You see, you can make all the plans you want, but there are still factors you can't control. You can't make reservations on airplanes if you don't know when you'll need them. And what if the airlines aren't flying because of their own -- or the air traffic control system's -- Y2K problem?"