For the first time, regulators have cracked down on a bank for not properly addressing the year-2000 computer problem.

In a sign that the banking agencies are prepared to back up their talk with strong action, the Federal Reserve Board slapped a cease-and-desist order on Putnam-Greene Financial Corp., Eatonton, Ga.

The Federal Deposit Insurance Corp. and the Georgia Department of Banking issued similar enforcement orders against the $209 million-asset company's three subsidiaries: Farmers and Merchants Bank in Eatonton, Farmers Bank in Union Point, and First Bank of Coastal Georgia in Pembroke.

Putnam-Greene's "policies and practices with respect to electronic information systems are detrimental to the bank and jeopardize the safety of its deposits," said the FDIC's Nov. 12 order.

The concern centers on crucial software that technology experts warn could go haywire after Dec. 31, 1999. Unless they are corrected, computer programs that register years by their last two digits-00 in the case of 2000-can miscalculate interest charges and other crucial financial data.

Regulators have incorporated year-2000 compliance into their regular examinations, and more institutions are likely to feel the heat if they are not up to speed.

"Some smaller banks are moving slower than we'd like to prepare, in particular, their vendor management plans," Julie Williams, chief counsel at the Office of the Comptroller of the Currency, told a meeting of the Online Banking Association last week.

The national bank regulator, she said, has completed about 500 of 2,000 year-2000 examination checks due by mid-1998.

Joe Hudson, executive vice president of Farmers and Merchants Bank, downplayed the Putnam-Greene problems and said the regulators want to make an example of that company.

"They want to send a message to the other bankers, and that's fine," he said. "We have already got our new system in and going ... We had an outdated system and we knew it."

In a written statement, Putnam-Greene acknowledged its banks' computer systems had experienced "problems" earlier this year. The holding company had been developing "informally" a year-2000 strategy when examiners visited this summer, Mr. Hudson said.

The bank officials did not admit to violating any laws or regulations and agreed to adopt a formal corrective plan by late December.

The Putnam-Greene banks are under orders to tell their regulators in January the full extent of the year-2000 problem. By February they must detail any credit risks posed by borrowers who are not fixing their own computers.

In August, the institutions must have all their systems repaired so that they can be tested before yearend 1998. Repairs must be completed by July 1, 1999, according to the enforcement documents.

The banks and their owner were cited for other computer system violations including faulty audit and security procedures, poor board oversight, insufficient employee training, and inadequate controls over vendors.

Lawmakers have begun proposing legislation to protect banks and their customers from the potential computer snafus.

Sen. Robert F. Bennett, chairman of the Senate Banking subcommittee on technology, on Monday asked President Clinton to form a special White House office to stave off a year-2000 crisis.

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