Commercial banks are far ahead of other businesses in preparing for the predicted worldwide computer snarls at the turn of the century, experts told a Senate panel Thursday.
More than 70% of banking and other financial services companies are taking corrective steps, while only one-third of U.S. companies and government agencies can say the same, Larry Martin, president of consulting firm Data Dimensions Inc., told Senate Banking's technology subcommittee.
Subcommittee Chairman Robert F. Bennett cautioned that institutions must publicize their efforts to soothe customers. "Consumers may feel threatened by the uncertainty associated with the date change," the Utah Republican said. "This could result in excess withdrawals from financial institutions or a selloff on Wall Street."
But the industry's efforts may not be enough, said David M. Iacino, senior manager of BankBoston's millennium project.
"In my discussions with other banks, customers, and service suppliers, I feel that unless comparable programs to BankBoston's are put in place within the next few months, the effect will adversely impact even those that are adequately prepared," Mr. Iacino testified, noting that his bank plans to spend $50 million on the problem.
Jeff Jinnett, president of LeBoeuf Computing Technologies LLC, said the commercial banking industry will spend an estimated $7.2 billion reprogramming or replacing software.
Unlike big banks, community banks may not have the resources to repair their computer systems, several witnesses said. If these banks failed as a result, large banks they do business with could also be harmed. Banks also should put aside more for loan losses in case the year 2000 problem damages borrowers' businesses, witnesses said.
Mr. Jinnett asked Congress to create a year 2000 commission, require financial institutions to jointly test their systems in 1999, and place a cap on lawsuit damages to foster industry openness on the problem.
Many computer programs use two digits to represent the year. Experts fear that on Jan. 1, 2000, these systems will misread the "00" in their internal clocks as 1900, sparking severe malfunctions.
Unless banks fix their computers, they might face a host of problems, including inadvertent cancellation of all automated teller machine cards, miscalculation of interest and finance charges, and failure to mature certificates of deposit.