Think it's either
(1) The FED doesn't trust its own rating systems (what Cheryl said)
(2) The FED does trust its ratings systems, but the results are bad enough to cause panic withdrawls immediately.
(3) Some lawyers have gotten involved with the process.
Hope it's just #3. :-)
It's none of the above!
If the regulatory agencies allowed banks to disclose their examination results, the banks that passed would ALL use this examination as some sort of "proof positive" that they were ready, which the examination is not geared to certify. In other words, the banks would turn their examination status into a marketing ploy, which would trigger the rest of us to investigate exactly how do all these banks know that they are Y2K compliant, which would then lead us all to say, "Bah, that examination is not proof of anything other than that the bank has started a program and has awareness". When all the while the examination was not designed to certify Y2K compliance.
The regulators have said all along that it is the bank's responsibility to prepare itself for Y2K. The regulatory exams are to supply enough information to the regulators about the readiness of the institutions for industry protection. Laggard institutions will then be subject to one or more of the following disciplinary actions:
Deficiency Notification Letters
30 day corrective action required
Monthly Oversight for the duration
Limiting expansion activity
M&A denial
Cease and Desist orders
Lower risk ratings
Civil money penalties
Institution closings
The "phase II" examinations have just been started, checking for progress on Testing and Congingency Planning. THIS is the important round of examinations, whereafter the regulators will start taking action against banks.
I think that the more severe discipline will be reserved for banks that have problems other than with Y2K. "Good" banks that are slow on Y2K will probably get letters and other light pressure to pick it up. Beyond this I can only speculate.
BTW, my firm trains federal bank examiners on executing Y2K exams. We are training the Federal Reserve examiners right now on Testing and Contingency planning. There is a very diverse level of technological understanding in the group, from very capable IT examiners to non-technical banker-types.
I want to see what will happen when the regulators start issuing wholesale disciplinary measures sometime around next March. |
