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It is always nice to know that the Federal Deposit Insurance Corporation, a quasi-government agency that insures deposits up to $100,000, and has a dollar in T-bills in reserve for every hundred dollars insured, is content with the pace of y2k progress by most U.S. banks.
As for the banks outside the U.S., the FDIC is mute. That's not its jurisdiction. Too bad its jurisdiction sinks or swims with the international banking system.
This report should be classified under, "I'm OK (though noncompliant); you're OK (though noncompliant)."
Question: How does the FDIC know that banks are making satisfactory progress, since no money center bank has ever achieved compliance? Since there is no standard of performance, how does the FDIC know which banks are performing all right?
Answer: The FDIC sent out a
survey. The bankers said they're doing OK. Trust them. Your bank account is perfectly safe, more or less. It's as safe as the Federal government's ability to collect and disburse checks. Through banks.
But if the government is dependent on bank operations to fund its T-bills, and the FDIC needs T-bills to insure the banks. . . . This sounds like circular reasoning.
In my head is a chorus from some ancient ditty: "The music goes round and round, oh-oh, oh-oh, oh-ho, and it comes out here."
But what will come out of your bank's ATM machine in 2000? Oh-oh.
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FOR IMMEDIATE RELEASE
PR-37-98 (6-1-98)
Media Contact: Phil Battey (202) 898-6993
FDIC ANNOUNCES RESULTS OF YEAR 2000 ON-SITE REVIEWS
The Federal Deposit Insurance Corporation (FDIC) today announced that examiners had completed at least one on-site review at each of the 6,034 institutions it regulates to assess the institution’s efforts on addressing Year 2000 problems. The efforts of each institution were assessed to be “satisfactory,” “needs improvement,” or “unsatisfactory” as of the date it was examined. The FDIC found that 5,296 of the 6,034 institutions it supervises -- or about 88 percent -- were making satisfactory progress. Another 695 institutions -- or about 12 percent -- needed improvement in their efforts. The efforts of 43 institutions -- less than one percent of all FDIC-regulated institutions -- were found to be unsatisfactory.
“We completed these assessments one month ahead of schedule,” said Nicholas J. Ketcha Jr., Director of the FDIC’s Division of Supervision. “We consider Year 2000-associated risks to be the number one safety-and-soundness concern for the banking industry.”
Banks assessed “unsatisfactory” are being reviewed on-site at least once every quarter. In addition, enforcement actions have been -- and will continue to be -- considered in those cases where progress or response is unsatisfactory. . . .
A “satisfactory” assessment does not certify that an institution is ready for the Year 2000. Rather, the assessment measures the progress of the institution’s management, who are ultimately responsible for ensuring that a financial institution is prepared for the Year 2000 date change. A “needs improvement” assessment indicates that the management of an institution is late in making required progress as of the date of the review, but that the deficiencies could -- for the most part -- be corrected quickly. An “unsatisfactory” assessment reflects a failure on the part of management to take the steps necessary to address the Year 2000 problem as of the date of the examination.
The purpose of the FDIC’s initial assessment process was to identify and rank deficiencies in the efforts of bank management to address Year 2000 problems. Going forward, supervisory assessments will emphasize the efforts of bank management to correct deficiencies in both management and systems. Because of the critical nature of the testing process in achieving Year 2000 readiness, the FDIC will take increasingly stronger action against institutions that remain in -- or migrate to -- the “needs improvement” or “unsatisfactory” categories. In addition, the FDIC has prepared standard language for Year 2000 purposes so that corrective programs and enforcement actions can be quickly processed.
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Congress created the Federal Deposit Insurance Corporation in 1933 to restore public confidence in the nation's banking system. The FDIC insures deposits at the nation's 10,922 banks and savings associations and it promotes the safety and soundness of these institutions by identifying, monitoring and addressing risks to which they are exposed.
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