On Feb. 17, the Federal Financial Institutions Examination Council [http://www.ffiec.gov/] issued a set of guidelines to help banks, credit unions, and savings and loans to keep their customers informed about their Year 2000 status and contingency plans.

In many ways, the FFIEC's "Year 2000 Customer Communication Outline" [http://www.ffiec.gov/custcom.htm] resembles Year 2000 compliance statements issued by other industries. The document suggests that banks adopt a variety of methods for educating customers, including training tellers and other front-line personnel to respond to customer inquiries; establishing toll-free hotlines; issuing monthly or quarterly statements containing Y2K information brochures or other written disclosures; holding educational seminars; and developing Year 2000 Web sites. While many banks have already taken such steps, their importance cannot be overemphasized.

The Y2K stakes are especially high for financial institutions. "Although every business faces risk from the Year 2000 date change, banks and savings associations face generally greater risks," said Donna Tanoue, chairman of the FDIC, in a Sept. 17, 1998, speech before Congress. "They carry out transactions that are highly dependent upon date-sensitive functions and they also participate in many date-sensitive transactions with other parties, both domestic and international." Not only have financial institutions had to battle the Millennium Bug, they have also had to fight public unease and misconceptions about their Year 2000 compliance status. Without customer confidence, their remediation efforts would be in vain.

The U.S. banking industry has met both of these challenges head-on. Its preparations for the new millennium began as early as 1996. The industry as a whole is spending more than $8 billion to fix Year 2000 problems and is on track to complete the testing phase by June 30, 1999. According to John Carter, deputy regional director of the FDIC [http://www.fdic.gov/], 90 percent of U.S. banks are making "satisfactory" progress toward Year 2000 compliance. And that includes small banks, despite the fact that many of them got off to a slow start. "Twelve months ago, 40 percent of small banks were at least 20 percent behind larger banks in Year 2000 compliance," said Lou Marcoccio, the Gartner Group's [http://www.gartner.com] Y2K research director. "But in the past two quarters, they have made considerable progress."

Nevertheless, contingency planning remains a high priority. The Federal Reserve has ordered an additional $50 billion in new currency to be printed and circulated to offset a potential run on banks and automated teller machines. The FDIC has pledged to insure all accounts up to $100,000, even for financial institutions that are not Y2K-ready. And Craig Mason, chief financial officer for Maryland's State Employees Credit Union [http://www.secumd.org/], told the Associated Press that industry estimates predict one in four depositors will withdraw $500 more than usual in anticipation of the Millennium Bug. His organization has set aside reserves to handle the possibility.

Some experts doubt the industry's positive statements about its Year 2000 compliance. Preliminary results from a survey by Weiss Ratings Inc. [http://www.weissratings.com/inthenew.htm] show that 32 percent of about 900 banks missed a December regulatory deadline for having "internal mission-critical systems" ready, a good indication that the industry is not as prepared as its proponents claim, said Chairman Martin Weiss. But Marcoccio disagrees. "A lot of these surveys highlight the one or two Y2K-compliance requirements that haven't been met while downplaying the majority that have," he said.

Marcoccio believes that by the year 2000, increased publicity about the banking industry's Y2K compliance will greatly reduce the likelihood of a bank run caused by public panic. Alan Greenspan, chairman of the Federal Reserve Board, recently added his voice to those advocating calm. "The most sensible thing is to leave [your money] where it is," said Greenspan in a Feb. 23 speech before the Senate Banking Committee [http://www.senate.gov/~banking/]. "There's almost no conceivable way that computers will break down and records of people's savings accounts would disappear."