Banks should finalize their year-2000 computer testing plans by June 30 and begin actual testing by Sept. 1, according to new guidance from federal regulators.

The long-awaited supervisory letter from the interagency Federal Financial Institutions Examination Council describes testing as "the most critical phase" of the year-2000 readiness process-and also the most costly.

"Failure to conduct thorough testing may mask serious remediation problems," the exam council said. "Failure to properly identify or correct those problems could threaten the safety and soundness of the institution."

The exam council estimated that testing will account for at least half of the time, cost, and personnel each bank spends to immunize its systems against the year-2000 glitch.

Jack L. Brock Jr., director of governmentwide and defense information systems at the General Accounting Office, said in a recent interview that regulators' guidance was a year late.

The guideline's five-point time line suggests that a bank's entire testing process-from conception to completion-could last well over a year. Bank regulators want testing finished by June 30, 1999.

Interim dates include Dec. 31, 1998, when testing should be "substantially complete," and March 31, 1999, when institutions reliant on service providers for so-called "mission-critical" systems should be largely done. A system is mission-critical if it is "vital to the successful continuance of a core business activity" or interfaces with such a system, the letter said.

By March 31, 1999, testing with external parties, such as business partners, payment system providers, and other banks, should also have begun.

The guidelines outlined the necessary components of a written testing plan. These include the testing environment, methodology, schedule, financial and human resources, documentation, contingency plans, and critical rollover dates.

The April 9 testing guidance is one in a series on year-2000 preparations. It follows letters concerning year-2000 project management, business risk, vendor management, and customer risk. Advice on contingency planning is expected to be released at the end of the month.

Subscribe Now

Access to authoritative analysis and perspective and our data-driven report series.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.