Joint Year 2000 Council identifies Year 2000 action plans for the financial market's private and public sectors

Press release  | 
08 January 1999


Basle Committee on Banking Supervision
Committee on Payment and Settlement Systems
International Association of Insurance Supervisors
International Organization of Securities Commissions

Press release

Press enquiries: +41 61 / 280 81 88

Ref. No.: 03/1999E

8th January 1999

Joint Year 2000 Council identifies Year 2000 action plans
for the financial market's private and public sectors

With less than a year to go until 2000, the Joint Year 2000 Council has announced what it considers to be the top priorities for the private and public sectors of the world's financial industry. Federal Reserve Board Governor Roger W. Ferguson, Jr., Chairman of the Council, stated "With limited time remaining before this unprecedented and complex event, many markets face great challenges to properly prepare for a smooth transition. In the wake of the euro conversion, it is critically important that financial markets around the world direct their attention to preparations for Year 2000. At this point, efforts should now be focussed on final remediation measures, implementation of comprehensive testing programmes and contingency planning."

The financial industry worldwide has played a leading role in raising awareness of the problem, fostering cooperation and taking the necessary steps to achieve readiness. The Council believes that it is vital that the public and private sectors of the financial industry continue to play a leadership role in their countries. Action plans for both sectors are outlined in the attachment.

Four critical themes cut across the key responsibilities for the private and public sectors and can be summarised as follows:

1. Although much productive work has been carried out around the world to adapt systems that need to be remediated, institutions and regulators should avoid complacency and maintain a high degree of attention at the most senior level.

2. Enhanced information sharing is critical to readiness efforts and to avoid unnecessary uncertainty in financial markets. (See a separate policy paper on this topic that was released today by the Council.)

3. Comprehensive contingency strategies should be developed by the private and public sectors in order to minimise disruption. (The Council expects to issue further information on contingency planning later in January.)

4. Modifications (including system changes as well as changes to regulation and legislation) that have the potential to disrupt Year 2000 programmes should be limited.


The role of the private and public sectors in addressing the Year 2000 issue

The role of the private sector

It is the responsibility of every individual firm to resolve its Year 2000 problems. While the Council recognises that, in many countries, the financial industry is ahead of other sectors in its Year 2000 preparations, uncertainties will remain with regard to the readiness of systems both internal and external to all organisations. Given that these uncertainties have the potential to cause serious disruptions to the smooth functioning of financial markets before, during and after 2000, the Council urges the following action from financial institutions around the world:

Continue senior management attention. For a firm to successfully address its Year 2000 challenge, it is necessary that the attention of senior management and the board of directors and sufficient human and financial resources be directed to this matter. Senior executives should appreciate their firm's dependence on third-party vendors, service providers, customers, counterparties and public infrastructures and the risks these dependencies pose. The Council is convinced that firms whose senior executives have properly understood the critical nature of the challenge will be best prepared to deal with any transitional problems that may arise.

Focus on testing programme priorities. Testing is a critical tool for gaining insight into systems' readiness to handle the date change properly (see the Council's paper, Testing for Year 2000 readiness). The Council recommends that firms focus their attention on proper and ongoing internal testing since experience has shown this phase to be the most crucial in detecting potential problems. With regard to external testing, the Council notes that market participants have developed a wide variety of testing methodologies, including industry-wide testing programmes as well as proxy testing initiatives. The Council welcomes these initiatives. Market participants should ascertain that the testing programmes that they consider are well matched with the time and resources available to plan and support them.

Improve transparency through information sharing and disclosure. In many countries, there continues to be insufficient information available on the Year 2000 preparations and readiness of individual firms, both within the financial sector and more generally. This raises a significant concern because it impedes efficient preparations by market participants and may exacerbate negative perceptions in the marketplace. Improved transparency through better information sharing can be effective in demonstrating the progress achieved and in contributing to the confidence that Year 2000 challenges are being addressed.

Comprehensive self-disclosure is the most effective way for firms to share information. The Council strongly recommends that market participants make use of standardised self-assessment tools, such as that developed by the Global 2000 Co-ordinating Group, to disclose information about their Year 2000 programmes and their implementation. The use of templates that identify specific targets and measure progress against these targets is expected to be a dynamic means of tracking progress towards readiness. At this stage, it is important that firms use opportunities to take advantage of efforts made by others, for example through the use of appropriate proxy testing. The Council is today releasing a policy paper that addresses these issues in further detail.

Limit system changes. It is important that firms carefully manage changes to their information systems in 1999 and early 2000. Modifications to renovated systems should be made with extreme care and only when deemed essential. In addition to the risk that changes may introduce errors to remediated systems, modifications may force a firm's customers or counterparties to adapt their own systems and operating procedures.

Evaluate and adapt business continuity plans. Given the nature of the Year 2000 problem, no institution will be able to assume that it has removed all threats to business continuity. It is important that individual firms review their current business continuity plans and evaluate them in light of the potential disturbances arising from the date change. In this regard, the most senior levels of management should be directly and actively involved in the contingency planning process and should ensure that the necessary resources are available to develop and implement the strategy. The Council is planning to release in the near future a guidance paper for individual financial firms that will assist firms in their Year 2000 contingency planning.

The role of the public sector

While individual organisations remain responsible for solving their Year 2000 problems, the public sector has an important role to play in fostering appropriate actions by market participants and ensuring the proper coordination between the various authorities involved, within the financial sector as well as at the national level. The Council urges regulators around the world to take the following specific action:

Maintain a high degree of attention. Despite economic uncertainties in many regions of the world and resource constraints posed by critical structural changes occurring in many markets, the Council believes that regulators should encourage financial market participants to continue to devote the maximum senior management attention and priority to this issue.

Monitor that financial institutions take all necessary measures to achieve readiness. Financial market supervisors should implement programmes that enable them to assess whether the steps being taken by a financial institution to achieve Year 2000 readiness appear to be reasonable and prudent. Supervisors will need to follow up quickly with those institutions that are judged to be inadequately addressing the Year 2000 problem. Supervisors may consider the use of target dates that are reasonable for the particular market as a way to provide a focus for market participants and promote the coordination of efforts. With regard to testing, supervisory authorities should emphasise the need for comprehensive testing by the firms they supervise; however, the supervisor's perspective on testing should allow for a degree of flexibility and permit a cooperative approach by market participants.

Encourage information sharing and balanced communication. Regulators should take the necessary steps to encourage voluntary self-disclosure by the private sector. In some countries regulators have mandated public disclosure, for instance through the filing of regular public reports. Mandatory disclosure should be considered as a means of obtaining information on the Year 2000 progress of individual firms, particularly if market participants are reluctant to share such information publicly on a voluntary basis. Moreover, it is expected that the disclosure of testing results will be effective in allowing firms to take advantage of actions performed by others, which should enhance the efficiency of resource usage.

Regulators can also play a constructive role in making sure through their communications that the Year 2000 information available to the public is balanced. While the millennium date change is a very serious problem and some disruptions are bound to occur, a great deal of productive work to mitigate problems is being carried out. Financial market authorities should seek opportunities to convey a factually balanced message about their respective sector's readiness. Further, the opportunities for authorities to share important information with one another, both domestically and on an international basis, are expected to help enhance the efficiency of the transition.

Limit regulatory changes. The Council believes that legislatures and regulators should limit legal and regulatory changes that might require resources to be diverted from a financial organisation's Year 2000 programme. Regulators should be cognisant of the additional resources necessary for firms to react to changes in regulation and should consider whether any proposed changes can be delayed until after 2000.

Take action to highlight the importance of the public infrastructure. Given the financial industry's heavy dependence on telecommunications, water, energy and transportation, prolonged failures of any of these sectors could lead to disruptions at the national and international levels. Following the Council's recommendation that national strategies be established in order to coordinate preparations for Year 2000 readiness across key industries and infrastructure providers, many countries have established a national Year 2000 coordinating body. The Council urges national coordinators to pay particular attention to the Year 2000 programmes of public infrastructure providers and to encourage them to disclose relevant information on their implementation.

Prepare for contingencies. Regulators should develop and implement appropriate contingency plans in order to prepare for possible disturbances relating to the millennium transition. Since public confidence in the financial system is a critical prerequisite to economic stability, financial market authorities need to develop, refine and test their own contingency plans to deal with individual or systemic Year 2000-related problems that could occur in their markets, both before and after 1st January 2000. The Council and its parent committees are preparing a number of policy papers for the respective segments in the financial industry. These will be released in the near future.

To conclude, the Council notes that much productive work has been carried out around the world to adapt systems for the date change. At the same time, many organisations have discovered that the problems are more complex and widespread than originally anticipated and that systems that have not been thoroughly remediated and tested have the potential to cause significant operational problems during the transition to 2000. The Year 2000 challenge therefore requires the continuous attention of senior business executives and policy-makers worldwide. The Joint Year 2000 Council intends to continue to develop initiatives, assist financial market authorities in taking appropriate action and guide private sector firms in taking appropriate steps to maximise worldwide readiness. Information on the Council's activities is available on its website at

Background: Since its establishment in April 1998, the Joint Year 2000 Council has undertaken a number of initiatives aimed at raising awareness of the Year 2000 problem and prompting appropriate action within the financial sector's global regulatory community. The Council's activities have included the development of guidance on a number of policy issues, such as testing and information sharing, the establishment of a global database of key Year 2000 contacts, the organisation of regional meetings and the distribution of a regular newsletter to financial market authorities worldwide.