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Technology Stocks : Information Architects (IARC): E-Commerce & EIP -- Ignore unavailable to you. Want to Upgrade?

To: Shane Stump who wrote (8719)	10/31/1998 3:47:00 PM
From: sibe	Read Replies (1) \| Respond to of 10786

How about going after the banks, Mr. Gruder? NationsBank in your backyard would be a good start. Bank Experts Are Nervous...Maybe You Should Be, Too Y2K Files By DAN GALLAGHER San Diego Daily Transcript sddt.com Oct. 26, 1998 Is your money safe for the coming millennium? Recent stirrings among bank experts suggest it may not be. Last week, bankers were warned during an industry meeting in Carlsbad that problems associated with the so-called "Millennium Bug," or Y2K in techno-speak, will cause some whopping losses in the nation's banks and financial institutions in the coming two years. This came just two days after a national ratings agency issued a survey finding a significant number of banks behind schedule in their programs to become Y2K compliant. For banks as well as other companies, the Y2K problem presents a particular dilemma. Fixing the problem is not cheap, not by a stretch. Programs to fix the bug are costing some of the larger institutions hundreds of millions of dollars (Chase Manhattan, one of the country's largest banks, will spend about $250 million alone to repair the glitch). Since that money has to be accounted for in the year in which it is spent, those charges will translate into some big-time cuts in earnings for the coming quarters, a problem that is already starting to be felt among investors. However, doing nothing, or doing too little, is an even worse option. Already, the bug is looking to be a gold mine for plaintiffs lawyers, who will no doubt start filing lawsuits just minutes after the apple drops on midnight, Jan. 1, 2000. And as consumers become more aware of the problem, they will start putting their money in places they feel already have addressed the problem. This scenario was described to a meeting of the International Bankers Association in California that was held in Carlsbad last week. John Hosack, a partner in the Arter & Hadden law firm who specializes in Y2K litigation, told attendees that a worst-case scenario is about $1 trillion in losses if a significant portion of the nation's computer systems shut down in 2000, a large portion of which will be from litigation expenses. "The importance of insurance coverage cannot be overstated," Hosack said at the meeting. "Substantial insurance claims should be anticipated by all banks, with particular scrutiny towards director's and officer's liability coverage." The problem is the result of the inability of many older computer systems to recognize the year 2000, since many of those where programmed using only the last two digits to recognize the year. Banks, savings and loans, credit unions and brokerage houses are especially under the scope for Y2K problems for several reasons. The date-sensitive nature of financial transactions, forward-looking orientation of a bank's computer systems and the immediate impact that the bug will have on a bank's customers make it particularly crucial that all financial institutions, no matter their size, make themselves Y2K compliant, experts say. According to an industry-wide survey released by Weiss Ratings Inc. last week, about 12 percent of the nation's banks and financial institutions reported being behind schedule in their Y2K compliance programs. Based on the number of banks and S&Ls participating in the voluntary survey, the survey predicted that about 1,300 out of the country's 11,000 banks are behind schedule in addressing the problem, which Martin Weiss, the survey's director, noted was a cause of "grave concern." "Furthermore, since the response to the survey was voluntary, it is safe to assume a tendency for the better-prepared institutions to move forward more readily, implying that significantly more than 12 percent of the institutions could be behind schedule in their Y2K preparations," Weiss said. The problem could be particularly severe for community-based banks and credit unions, since most of those are not publicly traded entities with the strict disclosure rules set by federal regulators. The high costs of fixing the bugs also tend to favor larger institutions with more capital to spend. As publicity surrounding the Y2K problem increases, these institutions are likely to lose customers to their larger competitors if they cannot satisfy customers that their systems are sufficiently repaired. For customers, experts recommend that you select a bank that will have all of its systems completed within the next few months so they can be tested during 1999. Also, keep detailed records of your financial transactions over the next two years so you can spot any inaccuracies resulting from Y2K-related glitches.