Fed issues rare Y2K order to New Mexico bank
WASHINGTON, Dec 14 (Reuters) - A New Mexico bank on Monday became only the second U.S. financial institution ordered by the Federal Reserve to beef up its computer systems to prepare for potential year 2000 problems.
With a year to go before a feared potential computer meltdown at the start of the next millennium, the U.S central bank issued a cease-and-desist order against Zia New Mexico Bank in Tucumcari, N.M.
It orders Zia to appoint a manager within 10 days to supervise the bank's Year 2000 readiness and within 30 days to present a written plan to cope with, ''risks that may be caused by failures of the bank's core business practices.''
Fed regulators previously served notice they will toughen efforts to compel banks and other financial institutions do whatever is necessary to ensure that their computers operate normally when Year 2000 rolls around.
The concern is that many computer systems, which recognize only the final two digits in any year, may shut down completely or fail to operate normally when 2000 occurs because they may not recognize ''00'' as a valid year.
The Fed, in a special supervisory letter to the 12 regional Fed banks in November 1997, said, ''achieving Year 2000 readiness is critical to ensuring the safety and soundness of the banking system.''
The only other enforcement order it has issued against a specific institution was on Nov. 17, 1997. The Fed ordered bank holding company Putnam-Greene Financial Corp of Eatonton, Ga., to develop a plan to show that all computerized operations it does for itself and for three subsidiary banks would function normally after the century date change on Jan. 1, 2000.
The U.S. central bank has previously said it intends to have extra cash on hand, so that if banks face large withdrawals in advance of Year 2000 it can supply the funds to them quickly.
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