The nations financial institutions are in an unenviable positiontheyre a favorite target of Y2K doomsday activists.


Yet, they say theyre probably better prepared than any other U.S. industry for the advent of the millennium.


Banks have been well aware of the issue because weve been extending long-term credit well into (the new millennium) for many years now, says Lea Werner, senior vice president and director of marketing for Washington Trust Bank here.


Financial institutions nationwide were spurred to early and aggressive action by regulatory agencies, and it has paid off, bank officials here assert.


Were at the end of our process, and we feel really good about where we are in our (preparedness) plan, says Heidi Stanley, executive vice president of Spokane-based Sterling Savings Bank. She says Sterling will be completely ready for the Year 2000 rollover by mid-year at the latest.


Still, bank customersand even some financial institution directorsremain concerned. Recently, one of the members of Spokane Teachers Credit Unions board of directors took President and CEO Steven Dahlstrom aside and asked whether he should withdraw money from his account before the end of the year, just to be safe. No, Dahlstrom told the board member: If your Visa card works now with a Year 2000 or later expiration date, it still should work next year. And theres no reason personal checks wont be accepted by businesses or processed by banks.


Says Stanley, Your money is safe. Nevertheless, she adds, There are going to be some doomsdayers out there who will not feel comfortable unless theyre able to have a little extra cash on handand banks are preparing for that, too.


On-site visits by regulators


Frank Hartigan, Year 2000 program manager for the Federal Deposit Insurance Corp., the Washington D.C.-based agency that oversees the nations banks, says the FDIC and other agencies that regulate financial institutions developed a pretty aggressive, coordinated Y2K strategy in 1996.


We trained literally thousands of examiners on a federal and state level, and each and every institution receives an on-site visit from this army of examiners, Hartigan says.


Because modern banking is so computer dependentalmost all transactions involve electronic processingboth federal and state regulators have set stringent computer-system Y2K preparedness standards for banks, thrifts, credit unions, related businesses, and financial-industry service providers. Those standards include timetables for reaching certain milestonesand regulators are making their on-site visits to ensure that institutions are meeting those milestones.


The last time federal regulators paid Washington Trust Bank a call, they spent more than a week reviewing 50 manuals that contained all of the banks Y2K test results, Werner says.


Weve had two on-site examinations by federal regulators and one visit by the state (regulators), and were expecting more, she says. Theyre being very thorough. This is not something theyre taking lightly.


Its certainly not, says Hartigan. He says the first round of on-site examinations was finished last June, and the results were favorable, with 97 percent of the nations banks receiving a satisfactory rating. The second round should be completed by March 31.


We think when the century date change occurs, for financial institutions its going to be a relatively insignificant event, he says.


Looking for silver linings


It will, however, have taken a lot of work to make the date change uneventful.


At Sterling Savings, a steering committee of 30 top bank managers oversees the Y2K effort. Stanley says she makes presentations on the subject to the institutions board of directors every month. Even when Sterling makes a big acquisition, the transaction doesnt get that kind of constant attention, she says.


Y2K is the No. 1 priority in the bank in 1999, Stanley says. Its the only project in our bank where the need for resources is not questioned. It has top attention and priority among the board of directors.


On one hand, that means Sterling should be ready when the Year 2000 rolls around. On the other hand, Stanley says she gets discouraged when she contemplates the time and money the Y2K problem is absorbingresources that really are adding very little to our bottom line.


Still, after all the hoopla has died down, Sterling will be better off because of Y2K, because the issue really has raised senior-management awareness and director awareness of the importance of technology, she says.


Dahlstrom, of Spokane Teachers Credit Union, also sees a silver lining in Teachers Y2K effort. We replaced our phone system in September, and were upgrading our telephone teller system. Were upgrading our optical archiving system in April. I cant tell you that some of those things wouldnt have been upgraded anyway, but its a good thing.


Used to being prepared


Bankers here say that preparing for the Year 2000 rollover isnt all that different from getting ready for other emergencies and unforeseen circumstances.


Banks have always had to prepare for contingencies such as power outages and telecommunications failures, says Werner. We had to face that during the ice storm (of 1996).


The difference with the millennium bug is that financial institutions know when it will strike.


Says Dahlstrom, If I tell you that were going to have an ice storm, you might say, Yeah, we might, and make some general preparations just in case. If I tell you were going to have an ice storm Friday, youd approach it differently. Youd take extra precautions.