PREPARING FOR Y2K...
If the Y2K bug is a plague that threatens to cripple the US economy, then Y2K blacklists - sometimes known as leper lists - could be called the vaccine. Some firms worry that Y2K glitches might force unprepared clients, customers, and suppliers out of business, and to guard against such unpleasant surprises many are now creating leper lists to protect themselves from potential plague victims.
First Union National Bank, the sixth-largest commercial bank in the US, recently completed a Y2K credit-risk assessment for all its existing loans and new loans under consideration. The bank probably hasn't rejected any loan applications because of Y2K, but lending officers have assigned each borrower a low-, medium-, or high-risk rating, with companies in technology-dependent industries like health care, energy, and agriculture receiving the greatest scrutiny. "We've adjusted our loan-loss reserves based on the probability of loan defaults due to the Year 2000," says Greg Coffey, Year 2000 policy officer for the bank.
Bob Wynne, a spokesperson for Bank of America, acknowledges that BofA is also compiling lists based on its loan portfolios. "We're asking customers about Y2K when they come to us for a loan," says Wynne. "It will become even more important as we move forward."
Indeed, the Federal Financial Institutions Examination Council - a group that includes representatives from the Treasury Department and the Federal Reserve Board - has issued Year 2000 guidelines that essentially require federally insured banks to create leper lists as part of their efforts to implement "appropriate risk controls." Borrowers are evaluated on the basis of Y2K compliance, exposure to derivatives, reliance upon international trade, and overall financial well-being. And like any good doctor making house calls, many banks are checking up on clients monthly.
But don't count on taking a peek at a bank's leper list - federal law strictly prohibits the release of information contained in FFIEC examination reports. Instead, third-party firms such as mutual funds management and financial ratings services have been compiling their own leper lists, using whatever data they can. Weiss Ratings, a Florida-based firm, recently released its own survey of banks and S&Ls - of the 1,500 institutions it surveyed for readiness, 127 scored "below average."
Leper lists are also popping up in other highly interdependent industries, like manufacturing and logistics. FedEx, for one, is using a "red, yellow, and green" ranking system to assess key vendors, suppliers, and service providers like airports and utilities. "We're finding that what you read in the papers is generally true," says Dinah Allison from FedEx's Year 2000 Project Office. "There's still time to come into compliance, but for now there are way too many names on our red list."
MUST READ
Ode to Risk
iMac Attack
Clean Slate?
Jargon Watch
The Life of the Party
Burn Rate Olympics: 1998's IPOs
Who Will Rock 1999
Home Depot Sleeps In
Boffo Box Office
Joysticking It to the Academy
Sneaking Past Windows
Hype List
Girls! Girls! Links!
Face Value
Inside the First "Internet War"
Built for Speed
People
Been There, Done That
The Bugs in Your Future
Are You on the Leper List?
Pandora's Boom Box
Tomorrow Today
Dead-Talent Agency
Future Projections
The California Spammer Hammer
Tired/Wired
Tips From an Ex-Spam King
Raw Data
