Regulators last week fired a shot across the bow of the banking industry as it sails toward the turn-of-the-century deadline for getting its computer systems in shape.

For the first time, regulators cracked down on a bank that they said has not done enough to ensure its computers are ready for 2000.

"It will have a wake-up call effect," said Pen Hollist, vice president in charge of First Chicago NBD Corp.'s year-2000 program.

The Federal Reserve Board hit $209 million-asset Putnam-Greene Financial Corp., Eatonton, Ga., with a cease-and-desist order that requires the holding company to repair its systems and report its progress frequently under a strict series of deadlines.

The Federal Deposit Insurance Corp. and the Georgia Department of Banking issued similar enforcement actions against the company's three subsidiary banks.

The get-tough measures came less than a month after Comptroller of the Currency Eugene A. Ludwig told Congress that banks, primarily small ones, are not doing enough to fix their millennium computer problems.

"Some national banks and some vendors need to speed up their efforts," Mr. Ludwig said. "Some banks, particularly some community banks, still do not have well-developed management processes for dealing with their vendors."

Lawmakers are putting the heat on the agencies to take action, industry observers said.

"This is a disaster in the making," Sen. Alfonse M. D'Amato, chairman of the Senate Banking Committee, said in written remarks in late October.

The committee "will hold the bank regulators responsible for moving the industry forward on this problem," the New York Republican said.

"That's a pretty clear marching order," Mr. Hollist said. "That has got to translate to increased oversight pressure on banks."

The technological snafu looms because many computer systems register years by their last two digits - 00 in the cases of 1900 and 2000. As a result, experts fear banking computers will confuse dates after Dec. 31, 1999, and go haywire.

The American Bankers Association on Friday released its first estimate of the price tag for millennium computer repairs by the banking industry: $4 billion by the end of 1999, or 2% of pretax industry earnings over two years.

Rather than enforcement actions, regulators said in interviews Friday that they would prefer to use guidelines and intensive examinations to nudge the industry forward.

The banking and thrift agencies plan to issue guidelines in December that outline responsibilities for bank management and require quarterly reports on progress.

These guidelines will be followed in early 1998 by instructions on scrutinizing software vendors and making sure borrowers and customers are addressing their own year-2000 problems. By the end of the first quarter, guidance for testing repairs should be ready.

"The better approach is to work with banks," said Don R. Vinnedge, the Fed's manager of trust and information technology.

The Georgia case may be an extreme example, because that institution had a history of technical problems, said Gordon Glaza, an ABA regulatory counsel.

But agency officials insist they will not hesitate to brandish their enforcement sticks.

"We are willing to take whatever action is necessary to make sure our banks are effectively addressing their year-2000 problems," said Mark L. O'Dell, director for bank technology at the Office of the Comptroller of the Currency.

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