The year 2000 - A challenge for financial institutions and bank supervisors

The Year 2000 poses a significant challenge for financial institutions because many automated applications will cease to function normally as a result of the way date fields have been handled historically. Failure to address this issue in a timely manner would cause banking institutions to experience operational problems or even bankruptcy and could cause the disruption of financial markets. As a result, banking institutions must take the necessary steps to ensure that problems and disruptions are minimised.

This paper is prepared by the Basel Committee on Banking Supervision (in order to serve as a reference on the Year 2000 issue for central banks and other banking supervisors. It contains four parts that: (i) put the issue in perspective; (ii) outline the steps institutions need to follow to resolve the problem; (iii) discuss key issues that need to be addressed to resolve the problem successfully; and (iv) identify how bank supervisors can help assure success. A more technical and detailed discussion of the Year 2000 issue is provided in Appendix A. Appendix B describes the components that go into a successful action plan. Appendix C provides a short checklist summarising some of the key factors that banks must address to successfully meet the Year 2000 challenge.