Financial Markets and Institutions:
Post-Hearing Questions on the Federal Deposit Insurance Corporation's Year 2000 (Y2K) Preparedness
AIMD-98-108R: Published: Mar 18, 1998. Publicly Released: Mar 18, 1998.
Pursuant to a congressional request, GAO provided additional information on the efforts of the Federal Deposit Insurance Company (FDIC) to ensure that the bank systems it oversees and its own internal systems are ready for the year 2000, focusing on: (1) a comparison of the relative progress of the National Credit Union Administration (NCUA) and FDIC in both internal and external systems year 2000 compliance; (2) how many months behind FDIC is in each aspect of its year 2000 project; (3) the possible consequences of year 2000 noncompliance and the possible impact on bank customers and on the Bank Insurance Fund; and (4) the Federal Financial Institutions Examination Council's (FFIEC) year 2000 efforts.
GAO noted that: (1) both NCUA and FDIC had initiated action to: (a) disseminate information and guidance about the problem to credit unions and federally insured banks; and (b) incorporate the year 2000 issue into their examinations and supervision programs; (2) despite this progress, both NCUA and FDIC face significant challenges; (3) FDIC is about 7 months behind in completing the assessment of its internal systems; (4) FDIC is late because it: (a) is still assessing 6 of its 40 mission-critical systems; and (b) has yet to complete contingency plans for all of its systems in case system repairs and replacements are not in place on time or do not work as intended; (5) according to FDIC, all of its institutions are vulnerable to the problem associated with the year 2000; (6) consequently, failure to address year 2000 computer issues could result in a range of outcomes from system malfunctions to failures; (7) more significantly though, malfunctions or failures could cause operational problems serious enough to bring about the failure of individual banks; (8) the exact impact on the Bank Insurance Fund is difficult to estimate at this point because FDIC does not yet know how many or which banks, if any, will encounter operational problems and fail; (9) however, FDIC has actions under way to identify problem institutions and is preparing itself for handling them should they become inviable; and (10) FFIEC has ongoing efforts that include developing guidance for financial institutions on contingency planning, interacting with vendors, and assessing risk from corporate customers.