District Circular Letters

• District Circular Letters Index

May 8, 1998

BANKING SUPERVISION AND REGULATION:
DEPOSITORY INSTITUTION TESTING FOR YEAR 2000 READINESS

To State Member Banks, Bank
Holding Companies, Edge Act Corporations,
U.S. Branches and Agencies of Foreign Banks,
and Others Concerned
in the Twelfth Federal Reserve District

Interagency Statement on Testing by Depository Institutions for Year 2000 Readiness

The member agencies of the Federal Financial Institutions Examination Council (FFIEC) are continuing to monitor the progress of depository institutions in addressing Year 2000 issues and provide guidance to assist their efforts to prepare for the Year 2000. Accordingly, the FFIEC has issued the sixth in a series of policy statements addressing safety and soundness issues pertaining to the Year 2000. The advisory, entitled "Guidance Concerning Testing for Year 2000 Readiness," describes the FFIEC's expectations regarding the scope and management of Year 2000 testing programs of depository institutions. The Federal Reserve Bank of San Francisco is pleased to provide this publication for your information.

The advisory emphasizes the role of depository institution boards of directors and management in the important testing phase of Y2K preparations. It specifies that depository institutions should develop and implement written testing strategies and plans for internal and external systems, placing priority on the testing of mission-critical systems. It also discusses testing with service providers, software vendors, and other third parties. Finally, the advisory addresses the need for depository institutions to verify their testing processes.

The advisory identifies key milestones and testing methods that depository institutions should use in preparing systems and applications for Year 2000 readiness. FFIEC expects depository institutions to have commenced testing of internal mission critical systems by September 1, 1998, and to have completed the testing of both internal and external systems by June 30,1999. These dates clarify earlier advisories that had stated that testing should be "well underway" by December 31,1998.

Please feel free to forward a copy of the relevant Interagency Statement to your customers, vendors, and third party service providers.

For Additional Information

For additional information regarding the enclosed FFIEC guidance or Federal Reserve's Year 2000 bank supervision program, please contact Mr. Robert Johnson, Assistant Vice President, Banking Supervision and Regulation, at (213) 683-2738.

If you have questions about the Federal Reserve System's Century Date Change Project, please contact your local Business Development office, as listed below:

FEDERAL RESERVE BANK OF SAN FRANCISCO