Memo RM1999-2
May 12, 1999
To all Kansas State Chartered Banks and Trust Companies
RE: Y2K Ratings Firms
The Kansas Office of the State Bank Commissioner is devoted to working with all state chartered institutions to prepare for the new millennium. Although the institutions in our state and across the country are making significant progress toward a smooth transition to the Year 2000, it is critical that consumers know the financial industry will be well prepared, so that they avoid panic and irrational decisions.
Because consumer confidence is so vital, our Department is concerned about independent, for-profit firms publishing results from Y2K questionnaires that claim to diagnose an institution's Y2K readiness without the benefit of comprehensive on-site Y2K examinations. In some cases, these firms' survey results on individual institutions have differed significantly from the ratings assigned by the institutions' regulators.
I want to make sure that you are aware that your institution is under no regulatory obligation to complete any Y2K survey from an independent, private ratings firm. Both state and federal regulators have publicly informed these firms that they may not report an institution as non-Y2K compliant because it has chosen not to complete their survey. Regulators have also warned these firms that financial institutions may not share the Y2K rating assigned by their regulator.
Unfortunately one of these ratings firms recently announced that at least one large bank in the Northeast was poorly prepared for Y2K, even though the institution informed its regulators that none of its employees completed a questionnaire or provided information that could have been the basis for a reasonable assessment. Because these firms are publishing ratings that may misrepresent your Y2K readiness, we strongly encourage you to inform your customers proactively about your institution's hard work to prepare for Y2K.
The good news is that a recent Gallup poll indicates that the public wants to hear information on Y2K plans and readiness directly from their institutions. Unfortunately, many institutions have not communicated directly with their customers about their Y2K preparations.
Here are some ideas to make sure that your customers get the message that your institution is actively and aggressively preparing for the century date change:
* Send a letter to your customers that summarizes the key steps that you've taken to prepare your systems so that they work smoothly in the year 2000. Use plain English to avoid confusion.
* When your customers call your institution and are on hold, play a message that informs them about the principal components of your Y2K plan. Advise them that you are working hard and plan to make a smooth transition into the new millennium.
* Provide your customers with accurate information on Y2K. Distribute the FDIC brochure entitled, "The Year 2000 Date Change," which explains the Y2K challenge and answers fundamental questions, including assurance that the Year 2000 will not affect FDIC deposit insurance. Your institution can obtain a camera-ready copy (for mass production) over the Internet at www.ffiec.gov.
* The federal banking agencies have also recently prepared a one-page guide entitled "A Y2K Checklist for Customers" to help consumers take prudent steps to prepare themselves for the century date change. You can access the checklist at the same FFIEC Internet site.
* Make sure your employees are well prepared to respond to questions from your customers. Visit the Conference of State Bank Supervisors website at www.csbs.org. This site contains answers to commonly asked Y2K-related questions, developed by a team of state bank regulators and leaders within the federal banking agencies.
* Meet with organizations in your community to provide them with information on your Y2K efforts and to answer their questions.
If you have any questions, please feel free to contact our office at 785-296-2266. We look forward to hearing from you.
Warm regards,
Judi M. Stork
Acting Bank Commissioner
