Financial executives foresee a harder time getting regulators to sign off on their year-2000 preparedness as the fateful year comes near.

Ninety-three percent of banks, thrifts, and credit unions passed the first wave of tests conducted by the Federal Financial Institutions Examination Council and completed in June.

The other 7% needed improvement, but fewer than 50 institutions were rated "unsatisfactory."

But regulators will be demanding more from financial institutions, said David Kominiak, senior information technology examiner for the Federal Reserve Bank of Chicago.

"We expect to intensify our effort in the coming year," said Frank Hartigan, the Federal Deposit Insurance Corp.'s year-2000 program manager.

Some banks are preparing for stricter reviews.

Merger partners Banc One Corp. and First Chicago NBD Corp. are still rated "satisfactory," said Verne Istock, First Chicago's chairman and chief executive officer, in a recent speech. But "don't be surprised if regulators start giving everyone in the industry a 'needs improvement' rating," he added.

First Chicago spokesman Thomas Kelly said Mr. Istock had "addressed the issue to ensure our people remain focused on continuing to meet our milestones."

"We are on target for meeting our year-2000 goal," Mr. Kelly said. First Chicago NBD will finish remediating and testing its internal systems this year and will test its outside interfaces in 1999, he said.

Regulators declined to discuss First Chicago or Mr. Istock's remarks.

Asked to comment on the apparent tightening of guidelines, Chicago Fed president Michael H. Moscow said the requirements were set in advance.

"There are a series of milestones or steps that individual banks must meet," Mr. Moscow said in an appearance at a year-2000 conference last week sponsored by American Banker and Strategic Research Institute.

"It's possible that at one point in the process they may be a little bit behind and at another point they'll be a little ahead," Mr. Moscow said. "Any type of rating they get from a supervisory body is subject to change."

The examination council has released eight statements detailing year- 2000 milestones that institutions must meet. For instance, they should have completed a test plan by June 30.

A recent statement did add a few requirements, said Mark L. O'Dell, year-2000 supervision policy director for the Office of the Comptroller of the Currency.

Previously the regulators had said the testing of internal, mission- critical systems must be under way by yearend 1998. Now it must be substantially completed by then.

The new statement also added two new deadlines. Testing with external providers must be substantially complete by March 31, 1999, and remediated systems must be implemented by June 30, 1999.

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