District Circular Letters

• District Circular Letters Index

October 20, 1998

BANKING SUPERVISION AND REGULATION:
PROCEDURES REGARDING CHANGES TO INFORMATION SYSTEMS
YEAR 2000 SAFETY AND SOUNDNESS STANDARDS
UPDATE OF CURRENT SAFETY AND SOUNDNESS STANDARDS

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

Guidelines Regarding Risks Posed by Changes to Information Systems

The Federal Reserve Board has announced procedures to manage changes to its information systems in 1999 and the first quarter of the Year 2000. The change management procedures were developed in conjunction with the Federal Reserve's Century Date Change Project. The procedures establish guidelines to limit Federal Reserve policy and operational changes as well as internal hardware and software changes during late 1999 and early 2000. A summary of the procedures is attached.

The Federal Reserve plans to complete renovation and testing of its critical information systems by year-end 1998. Subsequent changes to Federal Reserve policies, rules, regulations, and services could impair the Year 2000 readiness of critical information systems. The procedures are designed to balance the need to support changes to critical business processes with the need to limit changes to information systems during this critical period.

Governor Edward W. Kelley, Jr., Chairman of the Federal Reserve Board's Committee on Federal Reserve Bank Affairs, stated, "By limiting these changes to its systems, the Federal Reserve will also minimize changes that its customers could be required to make to their applications that interface with Federal Reserve System software. In addition, we intend to coordinate our activities with other institutions that typically generate policy and operational changes in the financial industry."

In that spirit, the Federal Reserve will disseminate its guidelines to assist other organizations that establish rules, regulations and standards for the financial services industry.

Interim Guidelines Establishing Year 2000 Safety and Soundness Standards (Docket R-1017)

The Office of the Comptroller of the Currency, the Federal Reserve Board, the Federal Deposit Insurance Corporation, and the Office of Thrift Supervision (collectively, the Agencies) are issuing interim guidelines with request for comment establishing Year 2000 safety and soundness standards for insured depository institutions pursuant to section 39 of the Federal Deposit Insurance Act (FDI Act). Under the auspices of the Federal Financial Institutions Examination Council, the Agencies have previously issued eight guidance papers on important aspects of Year 2000 readiness. The guidelines complement these eight guidance papers by establishing minimum safety and soundness standards for achieving Year 2000 readiness.

The interim guidelines became effective October 15, 1998. Comment is requested by December 14, 1998.

Proposed Update of Current Safety and Soundness Standards (Docket R-1018)

The Agencies have adopted an interim rule, with request for comment, to update their rules of procedure pertaining to safety and soundness standards issued under section 39 of the FDI Act. This interim rule is intended only to incorporate appropriate references to the Interagency Guidelines Establishing Year 2000 Standards for Safety and Soundness (Docket R-1017--see above).

The interim rule became effective October 15, 1998. Comments must be received by December 14, 1998.

Copies

Copies of the Board's notices (Docket R-1017 and Docket R-1018) are available from our Corporate Services Department. To request copies to be sent via mail, please call (415) 974-2748. To request copies to be sent via fax, please call (415) 974-3333, and specify document numbers 4152 and 4173, respectively.

Additional Information

For additional information regarding "Procedures to Manage the Risks Posed by Changes to Information Systems in 1999 and First Quarter 2000" or the 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

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