Banks are making headway toward resolving their year- 2000 computer problems but are not out of trouble yet, regulators told lawmakers Thursday.

At a hearing hosted by the House Banking Committee, agency chiefs said 19 of every 20 financial institutions nationwide have satisfied interim goals. Federal Reserve Board Governor Edward W. Kelley Jr. testified that banks have made "significant progress in renovating their systems."

But regulators pointed out that few banks have tested their repaired computer systems to make sure they work, a task they must complete by mid- 1999. Until that time, witnesses said, declaring financial institutions safe would be premature.

"What we are providing today is a progress report and not a final grade," said Timothy R. McTaggart, Delaware's bank commissioner and chairman of the Conference of State Bank Supervisors' legislative committee.

According to Donna A. Tanoue, chairman of the Federal Deposit Insurance Corp., 94% of the 10,700 FDIC-insured institutions had received "satisfactory" year-2000 ratings as of July 31. Another 5% were rated "needs improvement," while 0.4% were labeled "unsatisfactory."

Many banks improved their ratings in the second quarter. Ms. Tanoue said 11% of the banks her agency supervises had raised their grades from the first quarter, while 1% worsened.

But the FDIC chief said that even after satisfying all regulatory standards, some banks still might crash.

"It is possible that an institution could fail without warning signs in early January 2000," Ms. Tanoue said, because of external factors such as the loss of electricity or telephone service, she said.

The likelihood of failures due to Y2K difficulties has led bank regulators to begin assembling a list of potential acquirers, called a "bidders list," said Jack L. Brock Jr., director of governmentwide and defense information systems for the General Accounting Office.

At a Senate special committee hearing on the year-2000 problem, also held Thursday, witnesses testified on the security of pension and mutual funds.

"The mutual fund industry is well aware of the potential problems that the year 2000 presents, and is preparing to meet this challenge in a timely manner," said Securities and Exchange Commissioner Laura S. Unger.

At the House Banking hearing, regulators said they supported a bipartisan year-2000 liability bill approved yesterday by the Judiciary Committee. The bill would hold businesses harmless for good-faith year-2000 disclosures that prove wrong.

Rep. John J. LaFalce, D-N.Y., ranking minority member on the House Banking Committee, predicted that passage of the bill "might occur quickly."

Ms. Tanoue, Mr. Kelley, and Acting Comptroller of the Currency Julie L. Williams said they believed current law would protect banks which make "inadvertent errors" related to the millennial glitch.

On the issue of credit risk, opinions differed. Mr. Kelley cited a May study by the Fed which found that the year-2000 problem had not yet affected credit quality. But Ms. Williams called credit risk a "serious challenge" and said that some national banks have been training loan officers to assess customers' year-2000 risks, increasing loan-loss reserves, shortening loan maturities, and reducing credit lines.

Gov. Kelley encouraged lawmakers and fellow agency chiefs to avoid policy changes between now and January 2000 that might require banks to modify their year-2000-compliant computer systems. He also warned that bank directors, not government regulators, are ultimately responsible for meeting the year-2000 challenge.

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