[Congressional Record Volume 144, Number 22 (Friday, March 6, 1998)]
[Senate]
[Pages S1539-S1540]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




             EXAMINATION PARITY AND YEAR 2000 READINESS ACT

  Mr. LOTT. Mr. President, I ask unanimous consent that the Senate 
proceed to the immediate consideration of H.R. 3116, which was received 
from the House.
  The PRESIDING OFFICER. The clerk will report.
  The legislative clerk read as follows:

       A bill (H.R. 3116) to address the year 2000 computer 
     problems with regard to financial institutions, to extend 
     examination parity to the Director of the Office of Thrift 
     Supervision and the National Credit Union Administration, and 
     for other purposes.

  The PRESIDING OFFICER. Is there objection to the immediate 
consideration of the bill?
  There being no objection, the Senate proceeded to consider the bill.
  Mr. D'AMATO. Mr. President, I rise today in support of the 
Examination Parity and Year 2000 Readiness Act and I encourage the 
support of my colleagues in order to address the serious threat facing 
our nations' financial industry. While the new millennium brings with 
it the hopes and dreams of a new era, it is also accompanied by a 
significant threat to all Americans who use our technology dependent 
banking industry. The Congress must insure that our regulators are 
provided with the power and authority to protect the savings of all 
Americans.
  Mr. President, nearly every hard working American citizen uses a 
bank, savings and loan or credit union. Banks in particular represent a 
symbol of safety and trust where Americans feel confident about placing 
their savings and conducting financial transactions. The widely 
reported Year 2000 problem places that safety and trust at risk. For a 
variety of reasons, computer software systems and devices have 
traditionally used two characters to represent the year in date 
calculations. A typical scenario involves a system that arranges a date 
to perform a comparison or calculation. For example, comparing the year 
2000 to the year 1998, could result in 1998 being identified greater 
than 2000. The potential fallout could range from a simple 
miscalculation of interest on savings accounts, to the complete loss of 
customer records, and possibly even jeopardizing the viability of an 
institution. These systems must be validated to insure that they will 
function properly after December 31, 1999.
  The Examination Parity and Year 2000 Readiness Act requires Federal 
financial regulatory agencies to conduct seminars on the implication of 
the Year 2000 problem and extends the same examination authority bank 
regulators already posses to thrift and credit union regulators. This 
legislation enjoys bipartisan Congressional support and has the 
endorsement of the executive branch. With the proper attention and 
focus of our federal regulators, the savings of American citizens can 
be protected and the safety and soundness of the American banking 
industry can be assured.
  Mr. President, I want to commend Senator Bennett, the chairman of the 
Subcommittee on Financial Services and Technology, for his tireless 
effort to help solve the problems our financial intermediaries will 
face because of the year 2000 problem. With his usual perseverance, he 
has demonstrated the important role Congress has in understanding the 
impact of technology on the financial system. I also commend Senator 
Dodd for cosponsoring the Senate bill. Of course, quick action on this 
measure by the House was made possible by Chairman Leach's recognition 
of the need for this legislation.
  Mr. SARBANES. Mr. President, I would like to offer my support for 
H.R. 3116, a measure that will help our nation's bank regulators 
address the so-called Year 2000 computer problem, and enhance the 
safety and soundness of our financial system.
  The Banking Committee has held five important hearings on the Year 
2000 problem and its consequences. It became clear during these 
hearings that the Year 2000 problem, in which computer systems may 
crash because they fail to process the date change from the 20th to the 
21st century, could have a significant impact both on our financial 
system, and on the U.S. economy as a whole. witnesses testified that 
the problem is extensive, and will be expensive to solve. Our banking 
system is heavily dependent on computer technology, and failures at one 
institution could spread to others through their closely linked 
networks. Every single financial institution in the U.S. will need to 
solve this problem, and some individual banks plan to spend $250 
million or more on computer replacements and repairs.
  The consequences go far beyond the financial sector, however. 
Estimates of the worldwide cost of Year 2000 remediation range as high 
as $600 billion. One Banking Committee witness, economist Edward 
Yardeni of the investment firm Deutsche Morgan Grenfell, said that 
there is a 40% or greater risk that business dislocations caused by the 
Year 2000 problem could bring about a global recession as severe as the 
one that followed the OPEC oil embargo in 1973. The stakes involved 
clearly are high.
  I want to commend Senators Bennett, Boxer, and Dodd, along with 
Chairman D'Amato, for their leadership on this issue through their 
efforts in the Banking Committee. The committee has been working hard 
to make sure that our financial industry regulators solve their 
internal Year 2000 difficulties, and that our banks, thrifts, brokers, 
and credit unions are ready to enter the new century as well. Thanks to 
these efforts, our financial institutions are generally acknowledged as 
leaders in solving the problem, although much work remains to be done.
  This bill is a first legislative step toward helping our financial 
regulators meet the Year 2000 challenge. It directs each federal 
banking agency--the Federal Deposit Insurance Corporation, the Federal 
Reserve, the Office of the Comptroller of the Currency, and the

[[Page S1540]]

Office of Thrift Supervision, along with the National Credit Union 
Administration--to provide financial institutions with informational 
seminars on, and model approaches to, the problem. It also gives our 
thrift and credit union regulators the authority they need to examine 
an institution's vendors, particularly computer services vendors, for 
Year 2000 compliance. This will put all of our financial regulators on 
an equal footing with respect to these crucial examinations.
  Mr. President, the Year 2000 will not wait: there is no extending the 
deadline, and our financial institutions must be ready. To help our 
regulators meet that goal, I urge speedy adoption of this legislation.
  Mr. BENNETT. Mr. President, I rise today with my distinguished 
colleague, Senator Dodd, in support of HR. 3116, the Examination Parity 
and Year 2000 Readiness for Financial Institutions Act. We jointly 
introduced the Senate version of this bill, S. 1671 and are in full 
agreement with it in every respect.
  Mr. subcommittee has held five hearings on Year 2000 compliance and I 
will chair another hearing on this issue next week. Generally speaking, 
most of our financial institutions are ill prepared to face the 
millenial date change at this time. None of our regulatory agencies are 
in the position they should be, based on the time schedule issued by 
OMB and GAO. This problem is compounded because several of our 
regulatory agencies have insufficient enforcement authority to ensure 
that the financial institutions they regulate can continue to function 
in a safe and sound manner after the millennial date change.
  The bill before us at this time will give authority to the Office of 
Thrift Supervision (OTS) and the National Credit Union Administration 
(NCUA) in parity with the authority provided to other Federal banking 
agencies under the Bank Service Company Act (BSCA) with respect to the 
performance of services by contracted service providers. For example, 
OTS will be able to examine service providers that contract with a 
savings association, its subsidiary, or any savings and loan affiliate 
or other entity as identified in this legislation, as if it were 
inspecting the savings association itself. Under the BSCA, other 
Federal banking agencies already have this authority over service 
providers that contract with an insured bank or any subsidiary or 
affiliate of the bank that is examined by the agency.
  This authority enables all of the Federal banking agencies to take 
appropriate action against service providers, if for example, the 
services are provided in such a way as to jeopardize the safety and 
soundness of the financial institutions in question. This authority 
allows the regulatory agencies to take appropriate action against a 
service provider if the services being performed may result in a 
regulated entity not being Y2K complaint. We expect that the Federal 
banking agencies will continue to use their authority under the BSCA, 
and the authority provided by this legislation, to remedy the situation 
of services being rendered which will result in Year 2000 
noncompliance, as well as to prevent any other unsafe and unsound 
practices. To ensure that the legislation is interpreted to give OTS 
parity with the other regulators and that Congressional intent is 
clear, the bill references the OTS's ability to issue orders under 
section 8 of the Federal Deposit Insurance Act, which includes the 
Federal banking agencies' general enforcement authority to address 
unsafe or unsound practices.
  This bill also requires that federal financial regulatory agencies 
hold seminars for financial institutions on the implications of the 
Year 2000 problem for safe and sound operations, and to provide model 
approaches for solving common Y2K problems.
  Passage of this bill is supported by both the NCUA and OTS. In a 
``Statement of Administration Policy,'' OMB has notified us that ``the 
Administration supports passage of HR. 3116.''
  I want to take this opportunity to thank Chairman D'Amato, Senator 
Sarbanes, and Senator Dodd for their assistance and support. In 
particular, I want to thank Howard Mennell, Steve Harris, Andrew 
Lowenthal, Robert Cresanti, Robert Andros, and Laura Ayoud for their 
efforts in bringing this bill to a prompt and mutually satisfactory 
resolution. I also want to thank my House colleagues and their staff 
for adopting the language of our Senate bill, S. 1671, in the final 
version of the House passed H.3116. This has greatly expedited the 
handling of this bill in the Senate.
  Mr. DODD. Mr. President, I am very pleased that the Senate is poised 
to pass Examination Parity and Year 2000 Readiness For Financial 
Institutions Act, which I introduced with Senator Bennett last week. 
The legislation will provide badly needed authority and guidance to 
Federal financial regulators to help their supervised institutions cope 
with the Year 2000 computer problem.
  The Year 2000--or Y2K--computer problem is caused by the inability of 
most of the major financial systems to process the year 2000 as the one 
that follows the year 1999. This is caused by the fact that basic 
computer code, much of it written as many as thirty years ago, reads 
dates as two-digits, ``98'' or ``99,'' instead of four digits ``1999'' 
or ``2000.'' If left untreated, computers will read the year 2000 as 
the years 1900, 1980 or some other default date. The result is not only 
erroneous calculations, but the total disruption of many critical 
financial systems.
  Unfortunately, neither the Office of Thrift Supervision or the 
National Credit Union Administration have the authority to examine the 
Year 2000 preparations of service providers to thrifts and credit 
unions. Currently, other federal financial regulators--the Federal 
Reserve, Office of the Comptroller of the Currency and the Federal 
Deposit Insurance Corporation--have this authority.
  These service providers perform many of the key transaction and data 
processing for federally-insured thrifts and credit unions, 
particularly smaller institutions for whom it is not cost-effective to 
establish their own computer systems. As a result, it is imperative to 
the safety and soundness of these institutions for the regulators to be 
able to establish that their service providers will be Year 2000 
compliant.
  The legislation also contains provisions that require all financial 
regulators to hold seminars to educate their respective supervised 
institutions and, to the maximum extent possible, provide model 
solutions for fixing the problem. The beneficial impact of such 
outreach and education efforts for federally-insured institutions is 
self-evident.
  Mr. President, as I've said many times before, the Year 2000 problem 
is one that we will have to confront in many more ways than this 
legislation. The extent of the problem goes well beyond the financial 
services industry to affect virtually every segment of our nation's 
economy. But this sensible bill is a good first step to ensuring that 
Federal financial regulators have the tools necessary to address the 
problem in their area of jurisdiction.
  I urge my colleagues to join me in supporting this sensible, 
bipartisan legislation.
  Mr. LOTT. Mr. President, I ask unanimous consent that the bill be 
considered read the third time, and passed, and the motion to 
reconsider be laid upon the table.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  The bill (H.R. 3116) was considered read the third time, and passed.

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