NO.072

Update on Year 2000 Preparedness in the Australian Financial Sector

The Australian banking and financial sector is well prepared for the Year 2000 and

continues to be internationally recognised as being at world’s best practice.

The Australian Prudential Regulation Authority (APRA) has advised that banks have

essentially completed the remediation and testing of all critical systems and have

contingency plans in place to deal with unexpected problems or problems outside of their

control. These plans will continue to be reviewed and tested in the lead up to the Year

2000. Other financial institutions (namely, building societies, credit unions, life and

general insurance companies, superannuation funds and friendly societies) have now

completed the vast majority of remediation and testing of critical systems and are well

into the contingency planning phase.

The critical systems of the Australian Stock Exchange (ASX) are now Year 2000 ready.

The Sydney Futures Exchange (SFE) has completed the compliance testing of its core systems

(with the exception of one new system which is currently undergoing Year 2000 compliance

testing, expected to be completed shortly). Contingency planning by both the ASX and the

SFE is well under way.

The ASX, in conjunction with a representative set of organisations (which included

selected broking organisations, institutional settlement participants and banks),

successfully completed an industry test during April 1999. In July 1999, the 22

participants of the SFE industry wide test, including 21 of the SFE’s 25 clearing members,

met the core success criteria with only one minor Year 2000 related problem reported which

was rectified on the day.

The financial sector regulators, APRA, the Reserve Bank of Australia (RBA) and the

Australian Securities and Investments Commission (ASIC) have each completed their Year

2000 remediation and testing programs. Their business continuity plans have also been

updated to incorporate Year 2000 issues.

As previously reported, a comprehensive program to test the Year 2000 readiness of the

Australian payments system was successfully completed, on time, by 30 June and no Year

2000 problems were reported by test participants. Industry contingency plans for payments

clearing arrangements have also been finalised. The major credit card schemes operating in

Australia have also advised that they are well prepared for the Year 2000. As a result of

these efforts, the public can be confident that their electronic payments mechanisms, such

as ATMs, EFTPOS and credit cards, are Year 2000 ready.

The Governor of the Reserve Bank has already stated that customers’ deposits are

safe and that their records are not at risk from Year 2000 related problems. There is no

need for people to withdraw more money over the New Year period than they normally would

for a long weekend. If they wish to do so, however, the RBA has built up ample stocks of

currency notes to meet any increase in demand. The Governor of the RBA, in a statement to

the House of Representatives Standing Committee on Economics, Finance and Public

Administration in June this year, said that “the safest place for people to keep

their savings is in the financial institution that they are already with”.

Banks and other deposit taking institutions have also been communicating with their

customers reassuring them that deposits and transaction records are safe from the Year

2000 computer problem.

The RBA and APRA are in the final stages of establishing a joint communications centre

which will operate over the crucial date change period. This centre will ensure that the

financial sector regulators are kept fully informed of developments during this key period

and can communicate with regulated institutions and the Government as necessary.

The latest report of the Council of Financial Regulators, entitled “Year 2000

Preparations in the Australian Banking and Financial System”, was released on 13

September 1999. This report provides detailed information on developments in the financial

sector and the preparations of the regulators themselves. The report, and relevant contact

information, can be found at the web-sites of the three financial sector 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

29 October 1999