Banks Appear to be Getting a Grip on Y2K

In the frantic race to achieve Year 2000 compliance, banks and financial institutions seem to have taken a clear lead. Weiss Ratings Inc. (Palm Beach Gardens, Fla.) finds that only about 12 percent of U.S. banks and savings and loans are behind schedule on Year 2000 compliance work. Among the 1,500 banks surveyed, 8.5 percent received "below average" Y2K grades, while another 4 percent received "low" marks for slow progress. Another 11 percent reported "high" progress in achieving Year 2000 compliance.

Recent studies by Cap Gemini LLC (New York) and Gartner Group (Stamford, Conn.) also confirm that the financial services sector -- perhaps due to prodding from the Federal Deposit Insurance Corp. (FDIC) and other regulatory bodies -- leads all other industries in Year 2000 remediation efforts.

However, measuring banking sector compliance is a tricky issue, cautions Martin Weiss, Ph.D., chairman of Weiss Ratings. Institutions are not permitted to disclose federal Y2K audit results. Plus, "since response to the survey was voluntary, it is safe to assume a tendency for the better-prepared institutions to come forward more readily."

FDIC's own studies of insured institutions also paint an optimistic picture. The agency concludes that 94 percent of its insured institutions were making "satisfactory" progress toward Year 2000 readiness, reports FDIC Chairman Donna Tanoue. Only five percent were rated "needs improvement," and less than half of one percent -- 37 institutions out of 10,092 -- were rated "unsatisfactory." These banks are being reviewed on-site on a quarterly basis, with possible enforcement actions pending. FDIC itself has 370 systems, of which 39 are considered mission-critical, which are being remediated for Year 2000 compliance.

Until such assurances sink in, uneasiness about financial institutions' readiness to handle Y2K is running rampant. A recent survey of 330 technology executives by one major industry publication finds that almost a third plan to disperse their money across multiple financial institutions if it looks like Year 2000 will be a major problem. About 77 percent advise consumers to investigate their banks' Year 2000 compliance.

Of course, some consumers may be more demanding than others. One AS/400-based financial institution made sure it stayed ahead of the process -- it has thousands of IBM Rochester employees peering over its shoulders. "Our customers queried us for answers much earlier than the general public," says Dave Jorve, VP at the Rochester-based Mid- America IBM Employees Federal Credit Union (IBM EFCU).

In 1996, programmers at IBM EFCU began manually converting code, checking capacity for four-digit date fields and century-aware date math. Program modifications were completed by the spring of 1998. About 50 GBs of data were then examined and tested with Data Commander, an automated inspection and testing tool from Blackstone and Cullen (BAC, Atlanta).

A side-by-side comparison of two data sets, one with 21st century values, is currently under way at IBM EFCU. The third phase of the system testing process will be the comparison of the 400 management reports used to support bank operations. In these tests, IBM EFCU is aging the test sets to 2026, when weekdays and dates match the 1998 calendar. "If the software finds a disparity in the reports that are generated, we know it arose from a date handling problem," Jorve explains. IBM EFCU expects to complete the testing process by the end of 1998, with a few redundant checks to be performed over the course of 1999.