Norwest Corp. of Minneapolis has opted to outsource its trust accounting to SEI Corp.
Terms of the five-year deal were not disclosed. Norwest's trust division faced costs approaching several million dollars related to preparing its systems for 2000, bank executives said.
Financial services companies are slowly grappling with impending millennium burdens, which are rooted in computer code lines that cause systems to misread references to the year 2000.
Jay Kiedrowski, executive vice president at Norwest, said the banking company has already had problems when computers encountered bonds with call dates beyond 2000.
"The systems did not know how to handle it," Mr. Kiedrowski said. "Clearly, the year 2000 issue was a problem that we needed to fix."
The trust unit uses in-house software supplied by Financial Technologies International Inc., a New York software developer. Norwest decided to outsource the function after a nine-month study with Chicago-based Andersen Consulting revealed the banking company could save $10 million during the next five to 10 years.
"In hindsight," Mr. Kiedrowski noted, "it probably would have been better to do it 10 years ago."
The bank's off-the-shelf software package had not developed as expected, he added, noting that Financial Technologies International's trust system is used by only three other institutions.
Mr. Kiedrowski said SEI, which has a broader customer base than its competitors, would "continue to reinvest heavily in new technologies" and "be around for a long time."
Norwest administers 70,000 personal, institutional, and corporate trust accounts. The conversion to SEI's system should be completed next June.
SEI processes trust accounts for 32 of the 100 biggest banks in the nation. The Wayne, Pa., company also serves bank mutual funds.
Richard B. Lieb, president of SEI's investment systems and services unit, said the year 2000 problem has indirectly helped SEI.
The company also recently signed up Wachovia Corp., Winston-Salem, N.C., and First Hawaiian Inc., Honolulu. Mr. Lieb said he expects to add two more large banks by yearend.
Mr. Lieb said he can understand the burden bankers are facing, considering his own company's anticipated spending of "maybe $9 million or $10 million" by this time next year.
He said $4 million had already been invested in rewriting computer code. SEI's spending is to include linkages with outside systems, such as those of Depository Trust Co. and SunGard Data Systems.
"We had to go through and evaluate everything," he said. "With a little luck, we'll be under the industry averages" in terms of spending.