The Hong Kong Monetary Authority (HKMA) will intensify its supervisory efforts in the next few months to address the banking sector's obligation to be Year 2000 compliant. A letter to the chief executives of all authorized institutions has been issued outlining a number of additional measures:
- All institutions with work still in progress should be subjected to some form of independent verification of the Year 2000 compliance process by the end of 1998. Where institutions claim to be already Year 2000 compliant, the HKMA will require documentary evidence to support this and may require independent verification. There are a number of means of independent verification including:
- on-site examination of selected institutions by HKMA (the HKMA will set up dedicated examination teams for this purpose);
- review by external auditors;
- review by internal auditors from head office/parent bank to ensure local management are observing group policy on Year 2000 compliance; and
- review by other independent parties e.g. IT consultants who are familiar with Year 2000 issues.
- The HKMA will require the chief executive of each institution to provide a formal statement of Year 2000 compliance progress on a bimonthly basis commencing May 1998.
- The HKMA will co-operate with overseas supervisory authorities in helping to monitor the Year 2000 readiness of foreign banks with branches in Hong Kong.
- The HKMA will issue formal warning letters to the chief executives of those institutions which exhibit less than satisfactory or poor performance in their Year 2000 projects. This may serve as a basis for supervisory action against the institutions concerned. In addition, the institution's future prospect for expansion, or ability to engage in new activities requiring regulatory approval e.g. opening of new branches, may be restricted. The HKMA believes that such institutions should be directing their resources on correcting deficiencies in their Year 2000 effort rather than diverting resources by engaging in expansionary activities.
"The HKMA believes that these intensified efforts to check institutions' progress towards Year 2000 compliance will help to reinforce the responsibility of senior management to ensure Year 2000 compliance in their institutions," said Mr. David Carse, Deputy Chief Executive of the HKMA.
"Moreover, the HKMA recognises that achievement of Year 2000 compliance requires not only that individual institutions' systems are compliant but that they interface properly with the systems of other institutions and with shared systems such as those for payments and settlement. Arrangements for industry-wide testing of systems will be discussed with the Financial Services Bureau, other financial sector regulators and the Hong Kong Association of Banks," added Mr. Carse.
Year 2000 Bulletin
The HKMA also released today the "Year 2000 Bulletin" which is the first of a series providing a channel for the HKMA to disseminate information on the Year 2000 issue to the banking industry in Hong Kong.
Among other things, the Bulletin reports the results of the second survey on the status of authorized institutions' progress of their Year 2000 programmes as at 31 December 1997. The main highlights are as follows :
- Over 90% of authorized institutions expect to achieve Year 2000 compliance by 31 December 1998;
- An average of 45% of institutions' Year 2000 projects has been completed;
- The large majority (90%) of projects are progressing on schedule and within budget;
- About 10% of the institutions are falling behind schedule in their Year 2000 projects.
"Although only a limited number of institutions have experienced delays so far, there is still much work to do and the time available is strictly limited. This means that institutions cannot afford to relax their efforts. It is becoming increasingly understood that the Year 2000 problem is not simply an IT problem but an issue of business survival. It is therefore crucial that senior management of institutions recognise their responsibility to manage the progress towards compliance," said Mr. Carse.
Hong Kong Monetary Authority
7 April 1998
