AL 98-7
Subject: Year 2000 Guidance on Contingency Planning
Date: May 19, 1998




TO:    Chief Executive Officers of National Banks and Federal
       Branches and Agencies, Service Providers, Software
       Vendors, Department and Division Heads, and  Examining
       Personnel


This advisory is to alert you to the recent release of FFIEC
"Guidance Concerning Contingency Planning in Connection with Year
2000 Readiness" (attached).  This guidance supplements previous
FFIEC interagency statements and describes FFIEC expectations
regarding the Year 2000 contingency planning efforts of financial
institutions.

The FFIEC guidance highlights the differences between "Business
Resumption Contingency Planning" and "Remediation Contingency
Planning."  Business resumption contingency planning, the primary
subject of the guidance, is a bank's plan for the possibility of
the failure of its systems at critical dates in the future. 
Remediation contingency planning, discussed in more detail in
previously released FFIEC guidance, is a bank's plan to mitigate
the risk associated with a failure to successfully complete
renovation, validation, or implementation of its mission-critical
systems. 

The FFIEC guidance identifies and discusses four phases of the
Year 2000 business resumption contingency planning process:

1.     Organizational Planning Guidelines   defining the business
       continuity planning strategy;

2.     Business Impact Analysis   assessing the potential impact
       on the bank of mission-critical system failures;

3.     Contingency Plan    establishing a timeline for
       implementation and action, circumstances, and trigger
       dates for activation; and

4.     Validation   designing a method to test the contingency
       plan for viability.

The OCC expects national banks to complete the first and second
phases of the business resumption contingency planning process by
September 30, 1998 and phases three and four by December 31,
1998.

The FFIEC's guidance also clarifies the agencies' expectations
regarding remediation contingency planning.  The guidance
specifies that: 
 
     If a mission-critical application or system has been
     remediated, tested, and implemented, a remediation contingency
     plan is not required.
 
     If internal remediation efforts or vendors are expected to
     provide Year 2000 ready products and services within a short
     period of time, remediation contingency plans may not be
     necessary for those systems. 
  
     If a system is in process of remediation, and is on schedule to
     meet FFIEC timeframes, comprehensive remediation contingency
     plans may not be necessary.  

     If a remediation continency plan calls for insuring the
     availability of an alternative servicer or vendor, payment of a
     fee may be required.  Whether or not to pay this fee is a
     business decision that the board of directors and senior
     management of each financial institution will have to make. 
     Some of the issues management should consider when making this
     decision are detailed in the guidance.

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



                                                      
Emory W. Rushton
Senior Deputy Comptroller
Bank Supervision Policy

Attachment