Year 2000: Georgia Banks Blasted by FDIC

The fdic took the extraordinary measure of issuing cease and desist orders against three affiliated Georgia banks and their parent holding company, Putnam-Greene Foundation, accusing them of unsafe and unsound banking practices because of their lack of Year 2000 planning. To some, this was the culmination of low murmurs amplified to insistent urging, which, in turn, escalated to a cacophony of catastrophic predictions, about the effect of the Year 2000 date change on financial services institutions' computer systems.

The order outlines all the places the banks allegedly went wrong-from an inadequate electronic information system to failing to develop a disaster recovery plan-and requires the banks to install a new computer system, hire new management and develop a comprehensive Year 2000 plan with strict reporting deadlines.

And while these efforts are a given at major banks around the world, Year 2000 specialists say that many community banks were still asleep at the wheel before the FDIC stepped in and fired its regulatory cannon. The reason? They view it as a technology issue. "For most community banks, it's not a technology problem, it's a management problem," says David Furnace, technology practice manager at Texas-based Alex Sheshunoff Management Services.

Contrary to murmurs throughout the industry that the FDIC was looking to make an example out of Putnam-Greene, more orders could ensue before the agency finishes its review of all insured banks in June 1998, says Frank Hartigan, project manager for Year 2000 initiatives at the FDIC.

Despite these efforts, predictions about the date change's effect on the industry remain sketchy. "Most banks that are with major vendors will probably be okay," says Furnace. "Will there be banks that fail? Yes." FB

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