Peter Costello

Media Releases

Year 2000 Preparedness in the Australian Financial Sector  

NO.019

EMBARGO - 1pm 15 April 1999

YEAR 2000 PREPAREDNESS IN THE AUSTRALIAN FINANCIAL SECTOR

In a statement made today on the Year 2000 computer date problem, the Treasurer emphasised that the stability, integrity and efficiency of the financial system are critical to the performance of the Australian economy. As such, the Year 2000 preparedness of the financial sector is crucial for a smooth transition into the next millennium.

Against that background, he stated that "I have been advised that the Australian banking and financial sector is well advanced in its Year 2000 preparedness, and is internationally recognised as being at world’s best practice. I understand that remediation and internal testing of critical systems has largely been completed, and that the majority of financial institutions expect to complete external testing – the last stage towards achieving Year 2000 compliance – by end-June 1999." The Treasurer also noted that the Australian Prudential Regulation Authority (APRA) is closely monitoring financial institutions’ Year 2000 preparations.

Financial institutions have indicated to APRA that they are also carefully reviewing their contingency plans to ensure the continuity of their services and businesses if there were to be any problems as a result of the Year 2000 and that they expected this work to be completed by end-June 1999.

The Treasurer has also been advised that testing is well advanced in the various payments clearing systems, a key element of the financial system – the target date for completion is end-June 1999. The Reserve Bank of Australia (RBA) is participating in this testing and is closely monitoring the payments industry’s Year 2000 preparations. Contingency planning in the payments system is also well underway.

Around the century date change it is possible that people may increase their demand for currency notes to tide them over this period. The RBA has already stated that it is taking steps to supplement the significant buffer stocks of notes it usually holds. This is being done by printing a quantity of notes in addition to its normal requirement for 1999, and by stockpiling for possible use notes that in normal circumstances would be withdrawn on quality grounds. The RBA is also liaising with financial institutions and armoured car companies on distribution arrangements required to get additional notes into the hands of the public.

The financial sector regulators have all put in place procedures to increase awareness of the Year 2000 problem within their sectors and to monitor progress towards Year 2000 compliance. APRA and the Australian Financial Institutions Commission (AFIC) have introduced detailed quarterly reporting procedures to assess progress and to ensure that the issues are addressed at the board/senior management level within each financial institution. The Australian Stock Exchange also requires all listed companies to make Year 2000 disclosure statements.

The financial sector regulators work closely with each other (through a Year 2000 coordinators group of the Council of Financial Regulators), with financial industry groups and with international Year 2000 initiatives. This ensures that they keep in touch with current and emerging issues and international best practice, and that relevant information is shared throughout the sector.

One of the key considerations in planning for the Year 2000 is the high level of interdependence between various sectors of the economy. For example, financial institutions are reliant on the compliance of their counterparties and third-party service providers, especially the utilities and the telecommunications industry. Given the importance of this issue, the Treasurer welcomed today’s comments by the Minister for Communications, Information Technology and the Arts on Year 2000 progress in the telecommunications sector, and urged the State and Territory Governments to follow the Commonwealth Government's lead and make public statements about the Year 2000 progress of utilities in their areas of responsibility.

The Treasurer supported the recent letters from APRA to the financial institutions it regulates recommending that they disclose more fully their Year 2000 preparations. APRA has encouraged institutions to use the Global 2000 Coordinating Group approach as the minimum basis for disclosure. The Year 2000 Information Disclosure Act 1999 (the "Good Samaritan" legislation) should also assist them in making these disclosures. The Minister for Financial Services and Regulation will also be writing to industry representatives in the financial sector in the near future along similar lines.

It is important that disclosure be as open as possible so that other financial institutions, customers and the community in general are kept fully informed of Year 2000 progress. Such information also needs to be managed in a responsible manner. In this regard, the Treasurer noted that the media has a key role in providing an objective and balanced view on Year 2000 related issues – the community expects it to show a responsible attitude by not broadcasting unsubstantiated commentary and rumours. The Treasurer noted that these rumours could themselves have a greater impact on various sectors of the economy (especially the financial sector) than the direct consequences of Year 2000 related problems.

The Treasurer referred to the report of the Council of Financial Regulators entitled "Year 2000 Preparations in the Australian Banking and Financial System", which was released on 28 January 1999. This provides detailed information on developments in the financial sector and the preparations of the regulators themselves. The next version of this report will be released in the next few weeks. The booklet, and contact information, can be found at the web-sites of the various regulators:

Reserve Bank of Australia www.rba.gov.au

Australian Prudential Regulation Authority www.apra.gov.au

Australian Securities and Investments Commission www.asic.gov.au

Australian Financial Institutions Commission www.afic.com.au

15 April 1998

Contact: Ray Jones
02 6263 3849

15 Apr 1999

View more media releases …

Latest News

Paris Diary

Peter Costello Paris Diary

Read more …

To the Brink 1997-2001 Black Holes to Surplus Budgets

Peter Costello To the Brink 1997-2001 Black Holes to Surplus Budgets

Read more …

The Hole Truth

Peter Costello in the Daily Telegraph

Read more …

Videos

Video Screenshot

Watch videos …