AL 98-5
Subject: Year 2000 Guidance on Testing
Date: April 10, 1998

TO:  Chief Executive Officers of National Banks and Federal
     Branches, Department and Division Heads and Examining
     Personnel, and Data-Processing Centers servicing National
     Banks and Federal Branches 


This advisory is to alert you to the recent release of an FFIEC
interagency statement on the Year 2000 problem.  "Guidance
Concerning Testing for Year 2000 Readiness" supplements previous
FFIEC interagency statements by describing FFIEC expectations
regarding the Year 2000 testing efforts of financial
institutions.  

This guidance identifies key milestones and testing methods for
financial institutions to use to prepare their systems and
applications for the Year 2000.   Financial institutions should
develop and implement written testing strategies and plans to
test both internal and external systems (including hardware,
software, and environmental systems).  The plans should include,
at a minimum, the following elements: testing environment,
testing methodology, testing schedules, human and financial
resources, critical test dates, documentation, and contingency
planning. Financial institutions should test mission-critical
systems first.

The FFIEC expects financial institutions to meet the following
key milestones.  On or before:

June 30, 1998       Institutions should complete the development
                    of their written testing strategies and
                    plans.
               
September 1, 1998   Institutions processing in-house and service
                    providers should have commenced testing of
                    internal mission-critical systems, including
                    those programmed in-house and those purchased
                    from software vendors.

December  31, 1998  Testing of internal mission-critical systems
                    should be substantially complete.  Service
                    providers should be ready to test with
                    customers.

March 31, 1999      Testing by institutions relying on service
                    providers for mission-critical systems should
                    be substantially complete.  External testing
                    with material other third parties (customers,
                    other financial institutions, business
                    partners, payment system providers, etc.)
                    should have begun. 

June 30, 1999       Testing of mission-critical systems should be
                    complete and implementation should be
                    substantially complete.

In addition to testing for the rollover from December 31, 1999 to
January 3, 2000, financial institutions should also test for
several other date rollovers.  Among those dates is September 9,
1999.  This date will show up as 9999, which denotes the "end of
input" in many computer programs. 

A financial institution's reliance on third parties to design,
implement and manage their systems will affect the institution's
involvement in testing.  This guidance addresses options for
testing internally developed systems as well as testing with
service providers, software vendors and other third parties.

Failure to fix and adequately test mission-critical systems could
mean the difference between continuing to function and becoming
an early resolution candidate.

For further information on Year 2000 issues, contact the Year
2000 Supervision Policy Division at (202) 874-2340.



                                    
Emory Wayne Rushton
Senior Deputy Comptroller
Bank Supervision Policy


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