Year 2000 compliance

8 September 1997

Press release

8th September 1997

At their meeting in Basle on 8th September 1997, the central-bank Governors of the Group of Ten reviewed the need for financial institutions to check all their computer applications in advance of the new millennium. Not only will a large number of applications have to be converted or replaced, but extensive testing will be necessary to ensure that all operations run smoothly after conversion. While the major financial market participants are well aware of the problem and are taking steps to address it within their own institutions, time is running out for those institutions that have not yet addressed the problem. Further delay may prove costly not only for these institutions but also for their counterparties.

All participants in the financial markets, whether small or large, bank or nonbank, should already have specific strategies in place to convert any necessary applications and thoroughly validate them in order to allow coordinated inter-institution testing to take place well in advance of 1st January 2000. This is more than a technical issue; it is one that requires the attention of top management.

It is possible, in the light of the enormous scale and range of financial market participants, that certain applications may fail to operate smoothly on 1st January 2000. It is therefore important that all financial institutions, and in particular market bodies such as exchanges and clearing houses, develop appropriate contingency plans to deal with any interruptions to counterparty trades and payments.

These matters are of direct concern to two of the Committees that report to the Group of Ten Governors, the Basle Committee on Banking Supervision and the Committee on Payment and Settlement Systems. The Basle Committee has drawn up a technical paper for banks which sets out a strategic approach for the development, testing and implementation of system solutions as well as defining the role that central banks and other bank supervisors need to play in promoting awareness of the issue and enforcing action. The Basle Committee will work with banking supervisors worldwide to encourage banks to take appropriate action. The Committee on Payment and Settlement Systems, in coordination with other relevant G-10 groups, will work with the BIS to create a special purpose section on the BIS Internet Website containing information on the state of preparedness and testing of payment and settlement systems around the world with respect to the Year 2000 issue.