The Federal Reserve Board said last week that it would block mergers by banks with significant year-2000 computer glitches.

"In considering expansion proposals, an important element of the Federal Reserve's assessment of the financial and managerial factors will be an applicant's ability to ensure year-2000 readiness for the combined organization," the Fed said in a Nov. 12 supervisory letter that will be sent to all banks and holding companies it supervises.

The Fed also threatened to fine banks or downgrade their ratings if they allow year-2000 problems to fester.

Like other regulators, the Fed plans to examine its institutions by mid- 1998 and expects them to repair their major systems by yearend 1998.

-Olaf de Senerpont Domis and Dean Anason

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