All financial institutions will be examined to ensure the "year 2000 problem" does not lead to loan losses, customer confusion, or data errors, regulators told a Senate panel this week.

Experts fear that on Jan. 1, 2000, computer systems will mistake the two-digit "00" in their internal clocks for 1900, causing severe malfunctions or even computer program failures.

"All institutions are vulnerable to problems associated with the year 2000," according to a memo by Nicholas J. Ketcha, director of supervision at the Federal Deposit Insurance Corp. "This is not a project that can be delayed, or the deadline extended."

Senate Banking Committee Chairman Alfonse M. D'Amato, R-N.Y., and Sen. Robert F. Bennett, the Utah Republican who heads the subcommittee on financial services and technology, asked regulators in February to report on the problem by March 21.

The agencies spelled out a host of mishaps that might occur if financial institutions fail to reprogram their computers.

For example, automated teller machine cards could be canceled, financial accounting programs could miscalculate interest and amortization schedules,and sensitive record keeping systems could be damaged.

Data imported from automated clearing houses or payroll services could disrupt an institution's transaction processing. A bank, too, could be liable for disruptions it causes by sending out bad data or files.

Lenders also must be wary of borrowers that have not fixed their own computers. Creditworthiness could be jeopardized if the 2000 problem disrupts a borrower's business and inflicts financial losses.

The banking agencies are aiming to develop common exam guidelines for 2000 by the end of April.

The FDIC will examine the banks it supervises-state banks that do not belong to the Federal Reserve-by the end of 1997. The Office of Thrift Supervision plans to do off-site exams of thrifts this year.

The Office of the Comptroller of the Currency will do an initial assessment of national banks by June, with actual exams to be completed by mid-1998.

Large national banks with more complex computer systems appear to be more attuned to the problem than are many small banks, which may be relying too much on outside technology vendors, said Mark O'Dell, OCC's acting director for bank technology.

National Credit Union Administration examiners are supposed to be armed by June with a questionnaire on the 2000 problem that they will use in annual examinations of credit unions.

The Federal Reserve Board and the Securities and Exchange Commission had not responded to the senators' request by Tuesday.

Regulators said banks need to reprogram their computers by the end of 1998 so they will have a year to test corrective measures and work out any remaining problems, Mr. O'Dell said.

Mr. Ketcha noted that reprogramming and equipment purchases will be time-consuming and costly, and could cost individual banks "millions of dollars."

Most experts say that even the most prepared organizations will suffer some technical snafus because of the complexity of the problem and the lack of skilled computer programmers, according to the OCC.

"What we hope to do is minimize the level of disruptions that are going to occur," Mr. O'Dell said.

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