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To: CIMA who wrote (20653)	10/5/1998 12:33:00 AM
From: Bucky Katt	Respond to of 116764

IMF web page, updated imf.org

To: CIMA who wrote (20653)	10/5/1998 6:50:00 PM
From: goldsnow	Respond to of 116764

Y2K will cost US as much as the Vietnam war. Photo illustration: BELINDA PRATTEN Swat Y2K risks with millennium bug swaps By Roger Hogan Banks in Australia and the United States are developing "millennium bug swaps" – a new kind of financial instrument that could help businesses protect their cashflows against potential disruption caused by the year 2000 computer problem. According to Ms Tanya Styblo Beder, head of Capital Market Risk Advisors Inc, a New York-based derivatives consultancy, the swaps would allow companies to aggregate payments due between December 1999 and March 2000, and make them before or after that period. Other examples of contingency planning by the financial sector included proposals to complete year-end portfolio trades by December 15, 1999, as well as fall-back positions in the event of malfunctions in wire transfer, settlement, credit card, ATMs and other systems. In testimony to the US Senate Special Committee on the Year 2000 Technology Problem, Ms Beder singled out large and medium-sized financial firms in the US and Australia as being among the most advanced in dealing with the problem. Ms Beder even expressed "fledgling optimism" for financial firms in the US, based on "my observations of increasing momentum to implement contingency plans that lower risk during the critical period". Such momentum was due at least in part to a recognition of the potential severity of the problem, however. Banks, for example, were vulnerable not only to internal Y2K risk, but also that of their customers, and that of their customers' suppliers. In order to understand such risks, banks relied on surveys that their customers conducted among their suppliers. Ms Beder quoted a study that showed that such surveys attracted only a 25 per cent response; less than 18 per cent of responses were accurate. Although preparations were well advanced in Australia and the US, the story was different elsewhere. "Financial firms in Asia are far more concerned with whether they survive until 2000 – an issue we have named 'If 2K' rather than Y2K systems issues," Ms Beder said. "Financial firms in Europe are so absorbed by the systems challenges posed by European Monetary Union that non-EMU projects, including Y2K conversions, are commonly suspended or postponed. "A parallel situation exists in the United States, with some firms so absorbed by the systems challenges of Y2K that they have placed moratoriums on non-Y2K projects, such as dealing with a single currency in Europe. "This will have ramifications for our financial system in the future." Spending to solve the technological aspects was expected to run as high as $US600 billion, and the cost of business continuity issues – interruptions due to Y2K – was estimated as high as $US1 trillion. "The total spending necessary to deal with Y2K will exceed the amount the US spent, adjusting for inflation, fighting the Vietnam conflict ($US500 billion) but with luck will not reach the amount spent to win World War II ($US4.2 trillion)," Ms Beder said. afr.com.au