Regulators May Deter Bank Mergers Over Unsolved Year-2000 Problems

Regulators said Monday that they may block mergers by banks with year-2000 computer problems.

"There may be cause for limiting expansion in the next two years," said Scott G. Alvarez, associate general counsel at the Federal Reserve Board.

"It may take longer for us to review transactions, and theoretically there could be situations where we conclude this is a merger that should not to be approved," said Julie L. Williams, chief counsel at the Office of the Comptroller of the Currency.

Generally, regulators will require merging institutions to meet deadlines for resolving specific integration problems rather than rejecting a merger outright, she said. Companies that fail to meet these requirements would be subject to cease-and-desist orders and fines.

Speaking at a Glasser Legalworks seminar on electronic commerce, Mr. Alvarez said time is running out for banks to integrate and test their computer systems.

"We've always looked at systems integration issues, but usually we expect there will be time to work out any difficulties," he said. "But this is one problem we can't get an extension for."