The United Kingdom's Financial Services Authority, the country's chief financial regulatory body, has warned banks and investment houses that it will shut them down or block them from taking any new business if it feels they are not prepared to survive the Year 2000 problem.
At the Best Practice for Financial Institutions conference in England on Wednesday, the authority's managing director of financial supervision, Michael Foot, said it is not the job of the Financial Service Authority (FSA) to "solve other people's IT problems. It is our job to help protect investors from losses caused by inadequate preparation for the Year 2000. So in that sense preparing for the millennium is a regulatory issue."
The regulatory body, working with outside auditors, will look to firms for progress reports and plans, and decide whether they are pursuing a "credible, effective project," he said in a statement.
The millennium bug stems from decisions by programmers in the 1960s to refer to the date using only the last two digits of a year instead of all four. When 00 comes up for the year 2000, many computers will view it as 1900 instead, causing widespread problems.
The Gartner Group has estimated the worldwide cost of dealing with the bug at between $300 billion and $600 billion.
If after looking at a firm's project, it seems investors, or markets, are at risk, Foot said his department will conduct an independent report. "But, if we are satisfied that stronger action is justified to achieve our regulatory objectives," the FSA will "restrict a firm's activity to take on new business, to stop doing business altogether, or transfer its business to another firm."
Foot's warning underscores the British government's commitment to deal with the Year 2000 problem, or "bomb" as it's called in that country. Observers have hailed the country's government as one of the more advanced in its efforts to deal with the issues within its own computer systems and push the private sector to do the same.
Although the U.S. government has been chastised for what critics consider its weak efforts to fix its own systems, while insisting that civilian institutions prepare themselves, some legislators' efforts over the past couple of months have gained praise.
Last month, Securities and Exchange Commission officials said they will require more information from broker dealers and other firms to ensure that they prepare their computers for the next century. Under the proposed actions, most broker dealers and nonbank transfer agents would have to make additional reports to the agency during 1998 and 1999. (See related story)
Also last month, Congress passed legislation that would require federal financial regulators to educate financial institutions and help provide model approaches for solving common Year 2000 problems. (See related story)