After work one evening, officials at Pacific Southwest Bank in Corpus Christi, Tex., set the bank's telephone system to 2000 to see whether it could handle the century date change. It worked.

Still not confident, the $1.1 billion-asset bank tested the system again during working hours. Everything seemed fine. Employees could receive calls, they could make calls - until they tried a long-distance number.

The exercise points to the importance of rigorous year-2000 testing, considered by regulators to be the most critical component of year-2000 preparation.

Testing is intensifying as the yearend 1998 deadline for completing tests of internal mission-critical systems approaches. Trials of major systems provided by vendors should be finished by March 31, 1999.

As Pacific Southwest can attest, thorough and proper testing can be difficult to do. The bank still is trying to figure out why employees could not call out of the local area that day, said Roger G. Leblond, senior vice president of operations.

Experts suggested that institutions carefully prepare test scripts and leave lots of time to check the systems. They should also retain their testing documents to show regulators, customers, and shareholders in case they are sued.

Still, testing is not without its pitfalls, particularly for small banks that rely heavily on vendors. At a June Office of Thrift Supervision symposium, several institutions complained that technology companies were charging high fees for testing, forcing them to test in groups or putting them on waiting lists. The OTS said it was aware of these problems, but officials later declined to elaborate.

First Republic Bank, a $475 million-asset bank in Philadelphia, said it will pay Jack Henry & Associates Inc. $30,000 to test the core banking system it bought from the Monett, Mo.-based company in March 1997, said George S. Rapp, the bank's chief financial officer.

Mr. Rapp said he does not think Jack Henry's fee is unreasonable. If First Republic tested the system on its own, he said, it could not be confident it found all possible year-2000 bugs.

"It's definitely high, but it's probably in market range," Mr. Rapp said. "You are a captive audience. You don't have an alternative."

Bisys Group Inc. charges its customers between $18,000 and $50,000, depending on asset size, to attend four workshops on the year-2000 problem, said Peter M. Rodgers, director of internal audit. The fee also lets the banks have access to the company's testing facility.

Several bankers also have expressed concern that they do not have the opportunity to test their software directly with their service providers because too many other bank customers are vying to do the same.

Centreville Savings Bank in West Warwick, R.I., had the opportunity to participate in both proxy and individual testing with NCR Corp. for less than $2,000. In proxy testing, a bank determines its own compliancy by monitoring tests of other banks that use the same system.

A 20-bank user group tested NCR's core processing system on behalf of Centreville and about 400 other institutions in May. Then the bank tested its own network connections to NCR in August. Both tests were completed with few, if any, glitches, said Jacqueline Baczenski, Centreville vice president.

Several banks called Ms. Baczenski, a regional user group leader, to ask if individual testing was necessary, in addition to the proxy testing. She advised them to do it.

"We would be remiss if we had this opportunity to test the system with our own accounts and didn't," she said. "Can you imagine how the regulators would frown upon us if something didn't work at the year-2000."

Bankers should insist that vendors conduct trials using data customized to their institutions, said Mr. Rodgers of Bisys, who lectures on year-2000 testing.

Regulatory testing requirements are explained in an April 10 guidance from the Federal Financial Institutions Examination Council. An Aug. 31 statement provided additional information. Both are available from the council's Web site, http://www.ffiec.gov/y2k.

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