District Circular Letters

• District Circular Letters Index

August 11, 1998

BANKING SUPERVISION AND REGULATION:
YEAR 2000 GUIDANCE PAPERS

CONFIDENTIALITY ISSUES REGARDING
YEAR 2000 COMPLIANCE EFFORTS

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 Districtt

2000

Papers on Year 2000 matters have recent Regarding Year 2000

Settlements (BIS) Joint Year 2000 Council (JY2K Council) ¹ nd by the Basle Committee on Banking Supervision. The papers, which are directed toank supervisors and other interested parties worldwide, address the im are directed to bank supervisors and other interested parties he first paper, "Supervisory Cooperatio markets.

r Issues, June 1998 (No. 38) ," was issued by the Basle Committee. It diusses the responsibilities of home and host country regulators for t ," was issued by the Basle Committee. It discusses the ubsidiaries. The paper lays out a recommended framework for addressing ar 2000 supervision issues pertaining both to domestic banks with forgn operations and to domestic activities of foreign banks. Furth, the paper calls for cooperation between regulators on cross-bord issues. The supervisory framework for coordination and information sring is consistent with other BIS initiatives to address international tters among bank supervisors.

Confidentiality of Fiings, Ratings, and Disclosures Relating to Year 2000 Compliance Efforts among bank supervisors.

Banks generally provide the examined organizations with reports descring their findings and assign various ratings depending on the nature the examination or inspection. Ratings are usually numerical and includ"CAMELS," "BOPEC," and "ROCA" for state mber banks, bank holding companies, and the U.S. offices of foreign ban, respectively. Recently, a rating system was developed to assess an orgization's compliance efforts with regard to Year 2000 readiness (i.e., &ot;satisfactory," "needs improvement," and "unsatisftory").

In accordance with the Board's rules and long-st readiness (i.e., "satisfactory," "needs improvement," and "unsatisfactory").

ect to Year 2000 compliance examinations, certain service provids and select software vendors) are advised in writing that thexamination findings and ratings are strictly confidential and cant be disclosed. ²

In light of some isoted instances of banking organizations improperly disclosing the nking agencies' examination findings and ratings to the public, including in a fe

compliance ratings, it is necessary to re-emphasize the importance of mntaining the confidentiality of examination findings and ratings. To is end, the Federal Reserve Board wishes to remind depository institutns of the legal constraints that are placed on the public relea of examination findings and ratings. This includes emphasizing that emination findings and ratings should be shared by senior management on with employees who have received instruction concerning the confidentiity rules of the Federal Reserve and the other banking agencies a, thus, understand that the findings and ratings are confidential anday not be publicly disclosed. The boards of directors and senior managent of depository institutions should bear in mind the confidential natu of examination findings and ratings. Any post-examination disclosures would violate the Board's rules and would be addressed by the Federal Rerve, possibly through the use of a formal enforcement action.

ecause of the critical need for banking organizations to be ready for the century date change and to keep their customers, counterparties, d the public informed about the state of their readiness, examiners wi

ncourage boards of directors and senior management to disclose the steptheir organizations are taking to address their Year 2000 readiness a to comply with all applicable reporting obligations imposed by securies laws and regulations, including pronouncements issued by the S. Examiners should also make it clear that such disclosures mustin all instances, be made without reference to examination findings andear 2000 compliance ratings. With regard to Year 2000-relatematters, the Board also stresses that Year 2000 compliance ratings cnot be used in any manner to suggest that the Federal Reserve or anoth bank supervisory authority is certifying or warranting an organizati's readiness for the century date change.

Additional Iormation

For additional information about the issuesegarding the confidentiality of Year 2000 examinations, please contact M Stephen L. Siciliano, Special Assistant to the General Counsel for Admin

Additional Information

For additional information about the issues regarding the sion and Regulation, at (202) 452-2620, both of the F L. Siciliano, Special Assistant to the General Counsel for rding the BIS guidances or the Federal Reserve's Year 2000 bank supervion program, please contact Mr. Robert Johnson, Assistant Vice Present, Banking Supervision and Regulation, at (213) 683-2738.< Reserve Board.