WASHINGTON - Lost transaction records, funds suddenly made inaccessible, miscalculated interest and even failures of some banks.
The financial industry is especially vulnerable to year 2000 computer problems, yet only about 10 percent of banks and other companies have completed programs to handle them, an expert said Thursday.
The potential computer crisis starting Jan. 1, 2000, could cause consumers to lose faith in the security of their banks and the financial markets, several experts told a hearing of the Senate Banking subcommittee on financial services and technology.
Sen. Christopher Dodd, D-Conn., said there likely would be "a deluge of litigation" against banks and financial companies by consumers who lose money.
The warnings came as the White House released a report concluding the federal government could face a partial computer crash in 2000 because it is moving too slowly to fix the millennium problem.
Of the nearly 4,500 critical computer systems the government must repair, including those for national defense, air traffic control and income taxes, only 6 percent have been fixed, according to the report by the Office of Management and Budget.
When the forerunners of today's massive computer programs were first designed, storage space was at a premium. To save memory space on the old-fashioned mainframes, code writers simply omitted the first two numbers of a date. That means 1998, for example, would read as 98, 1999 as 99, and so on. The year 2000 would be read as 00.
Since the systems are coded to assume that all years begin with 19, computers will interpret 00 to mean 1900, if changes are not made.
The financial industry, too, is running out of time to repair the problem, the experts told the Senate panel.
Companies need to have a solution in place by the end of next year in order to allow a year for testing in 1999, said Larry Martin, president of Data Dimensions Inc., a consulting firm based in Bellevue, Wash.
"We have figured out a way," Mr. Martin said. "But is there time for everyone to get the job done? Not unless they start immediately."
Otherwise, he warned, "there will be failures" of some financial institutions.
Mr. Martin estimated that only around 10 percent of the banking and financial industry is ready for 2000.
"The lack of concern and action on the part of the international banking community is particularly distressing," he testified. "The ability of international banks to operate effectively after the year 2000 is, in our estimate, seriously in question."
If there are bank failures resulting from the year 2000 problem, taxpayers would ultimately foot the bill for any government bailout, noted Jeff Jinnett, president of LeBoeuf Computing Technologies.
One large U.S. bank, BankBoston NA, expects to spend some $50 million over four years to cope with its 2000 problems, said David Iacino, senior manager of the bank's Millennium Project.
Even if a bank is prepared, it could be adversely affected by its close links to other financial institutions that are not, Mr. Iacino said.
The parent of the Nasdaq Stock Market, the nation's second-largest, started its 2000 program in June 1996 at a cost of around $20 million, Nasdaq President Alfred R. Berkeley III told the subcommittee.
Even if nearly all the nation's banks and financial institutions become prepared for 2000, a highly publicized computer system failure of one of them could have a negative impact on stocks of other financial companies, some experts believe.
© 2018. All Rights Reserved. | Contact Us