More recently, on the Basle Supervisors’ Committee, I have been learning about the Year 2000 issues that confront bank supervisors around the globe. Scope Simply put, I do not think it would be possible to overstate the importance of the Year 2000 problem as an issue for the financial markets. Naturally, the tendency in these turbulent times is to focus on day-to-day concerns, and to leave future problems to be dealt with later. This tendency must be resisted strongly if we are to succeed in addressing the Year 2000 problem. I say this because the Year 2000 problem is an issue for every country, firm, organization, government agency, bank and piece of critical infrastructure in the world. If the Year 2000 problems that exist within software programs and embedded computer chips are not repaired by January 1, 2000, the affected systems will cease to function or will malfunction. Those firms that have checked for Year 2000 problems overwhelmingly have found that their systems were affected and would not have functioned normally in the Year 2000 without being fixed. Moreover, the efforts of firms around the world have demonstrated that while the extent of the Year 2000 problem varies, no country or sector is immune from it or can afford to ignore its impact. Financial sector organizations such as banks, securities firms and insurance companies are typically among the most highly affected organizations. National and local government systems and services are affected.
Critical infrastructure such as transport, water, power and telecommunications systems are also likely to be affected. Nearly all aspects of the economy in every country are therefore potentially at risk because of the widespread dependence on a country’s core infrastructure. The unprecedented scope of the Year 2000 problem means that a critical aspect of the issue is the management challenge. Substantial management resources are needed to coordinate the efforts to assess, repair, and test affected systems prior to the fixed deadline of BIS Review 85/1998  -2-  January 1, 2000. At the Federal Reserve, for example, we have created a number of management positions within our organization that are focused exclusively on different aspects of our Year 2000 preparations. A final point that underscores the need for urgent and sustained action is the increasing focus on the issue by the media, by the public and by market observers such as the rating agencies. Over the course of 1999, the extent of Year 2000 preparations by financial organizations will become the subject of ever more intensive scrutiny. As supervisors, therefore, we must do all we can to support the efforts of market participants to address the problem effectively, and to build confidence among others that this is being accomplished. While we must make it clear that supervisors cannot solve the problem, we can help mobilize others to take the necessary steps.