FYI, from the New York Times over the weekend
Foreign Banks Are Behind in Repairing 2000 Bug
By SAUL HANSELL
ig United States banks and investment firms, prodded by
regulators, are making progress on a widespread software problem that
could cause computers to crash seconds after midnight on Dec.
31, 1999. But many overseas banks in the increasingly
interdependent global financial system may be woefully behind or
even ignoring the problem.
That is the picture emerging from a new study presented to the
House Banking Committee last week and from other reports and interviews
with experts.
Like other American corporations, the nation's largest banks and
investment firms are collectively spending
billions of dollars in a painstaking search of their mainframe and
other computer software to identify and fix
date-specific lines of code that will stop working properly at the
dawn of the year 2000.
Because of a shortcut widely used by programmers until fairly
recently to conserve computer memory, many
programs now in use employ only two digits to represent the year,
so that 1975, for example, would be simply
"75." Unless the problematic lines of code are found and fixed, on
Jan. 1, 2000, many of these systems will set the year to "00" -- and the
computers will assume the year is 1900, potentially sending
everything from interest calculations to electronic door locks into contortions.
A new survey by the Gartner Group, a management consulting firm
in Stamford, Conn., found that while at least 50 percent of the nation's
large banks are halfway finished with the arduous reprogramming
required before 2000, only about 5 percent of the world's other big
banks have reached that stage.
And many of the world's smaller banks have
not
taken any action on the software problem. Unless
more foreign banks begin acting soon,
experts see
a potentially disastrous chain reaction across the
global computer networks on which billions
of
dollars of electronic fund transfers flow every day.
The potential problems are great enough
that 38
percent of the 1,100 computer industry executives
worldwide that Gartner surveyed in
September
and October said they might withdraw their personal
assets from banks and investment companies
just
before 2000.
"One of the big shocks of our study is how
little
work has been done outside of the United States," Lou
Marcoccio, Gartner's research director,
said after
testifying earlier last week at the House hearing.
"In South America, parts of Asia, most of
Eastern
Europe and even some countries in Western
Europe, banks have almost not started at
all,"
Marcoccio said. "Any company operating in these
countries faces a heightened risk that the
banks
they do business with will have a computer failure that
could knock the banks out."
he hearing was convened by James A.
Leach,
Republican of Iowa, who is chairman of the
House Banking Committee. Leach, who
plans
further hearings, said he would introduce
legislation that would require banking
regulators to
do more to help institutions cope with the year 2000
computing issues while limiting customers' ability to sue banks for
errors related to software problems if the banks had made a good-faith
effort to address them.
Concerns about the potential international effect of the year 2000
problem have been heightened by the worldwide stock market tremors
of recent weeks, kicked off by a currency crisis in Thailand, which
underscored how vulnerable financial markets are to the weakest link in
the global chain.
A recent report by the Bank for International Settlements in Basel,
Switzerland, a group of 10 of the leading industrialized nations' central
banks, noted that "problems focused in a single location could
rapidly affect others if payments fail to move as expected."
That report is just one of a series of initiatives taken by various
government and regulatory organizations in recent months to press financial
institutions to look at their computers and those of the companies
they do business with.
Late last month, Arthur Levitt, the
chairman of the
Securities and Exchange Commission, wrote all of
the country's brokerage firms and
securities
transfer agents, saying "Preparing for the year 2000 should
be of the highest priority," and
encouraging them
to complete their changes by the end of next year so
the industry can test its readiness in
1999.
Chase Manhattan Corp., the largest American
banking company, is preparing to spend at least $250
million to examine 2 million to 4 million
individual
computer instructions that process dates in its 2,000
separate systems.
Potentially more daunting, Chase has
identified
2,900 links between its own computers and systems
run by others, like stock exchanges and
money
transfer networks. The bank must make sure its
systems are not contaminated by computer
errors
made by other organizations.
In Europe, the reprogramming challenge is
compounded by the fact that banks must also convert all
their software to handle the scheduled
introduction of a common European currency in 1999.
"The big German and Dutch banks have this
well in
hand, but will every bank in Italy be ready?" asked
John Leonard, a bank analyst with Salomon
Brothers in London.
Domestically or internationally, one of the biggest risks, regulators
say, is of bank loans to companies that may run into difficulties because
of the year 2000 glitch.
At a speech in Hong Kong in September, William J. McDonough, the
president of the Federal Reserve Bank of New York, urged the
world's banks to modify their lending standards to ensure that
borrowers would be able to stay in business after the millennium.
"How well they handle this complex and costly technical challenge
could affect their business prospects and even their viability," he said. |
