Rare Degree of Cooperation Solves Computer Glitches.

IN an office in Monterey Park, there is a room filled with computer systems that manage every critical function Union Bank of California can perform, from keeping track of checking-account balances to making sure the cash machine runs properly.

Lee Kirkpatrick, Union Bank's senior vice president and Y2K program manager, likes to call the room the Time Machine. It is the focal point of the bank's Y2K preparedness program.

"It looks very much like H.G. Wells," he said. "We set all the computer clock dates ahead and we've tested all the systems to see how they work together as the century date rolls over. There's a lot of interaction, so we've gone through it twice to make sure it works."

Because of the complex network of computer systems and software it takes to operate a bank, getting financial institutions ready for Y2K has been a Herculean task. Not only must banking officials and programmers worry about preparing the systems that could immediately impact consumers, like those that keep track of checking accounts and ATM machines, they also have to look at more mundane items: Will the lights go on in every bank branch? Will the elevators work? Will the security cameras be operational? Will the microwave blow up?

To get a grip on the technical aspects of getting ready for Y2K, there has been an unprecedented amount of information sharing between financial institutions. For more than two years, Y2K representatives from the 50 largest U.S. banks have met in a forum run under the auspices of the Bank Administration Institute in Chicago.

Sharing models

At these meetings, banks have shared the strategies they've used to make sure that their systems are Y2K compliant.

"Banks developed large databases of their vendors - some forum members shared models and even actual databases built on standard office software so their peer banks wouldn't have to reinvent the wheel," said Clint Swift, director of banking technology at the Bank Administration Institute. "For some, it was the first time they had ever completely catalogued the suppliers they depend on."

The computer systems requiring attention can be divided into two camps: those that are unique to each bank and those that come to the bank via outside vendors.

To crack the problems with the Y2K code on their unique systems, local banks either hired programming experts or contracted with individual programmers.

"We had 2,500 separate projects that we had to look at," Kirkpatrick said. "They ranged from fixing a core system, like a wire transfer system, down to building infrastructure - are the lights and power and air conditioning going to work?"

When it came to working with outside vendors, most banks waited for software manufacturers to send a programming patch that would make the equipment Y2K compliant. Wayne Socha, senior Y2K project manager for Sanwa Bank, said bank programmers took these patches, installed them and then "tested the heck out of them. We don't go on anybody's word (that it works). We tested it ourselves, and in some cases where it was unfeasible for us to test it, we hired an outside company to proxy test it and share all their results with us. It's safe to say that we worked with over 100 contractors."

More work than expected

As programmers began their work, many banks realized that they had underestimated the scope of the problem.

Socha said the original estimate for the cost of completing the Y2K work for Sanwa Bank was $20 million. "It turned out to be twice as much work and cost $27 million," he said. "We were actually pretty happy to be so close to our original estimate."

Banks were assisted in making the Y2K fixes by government guidelines released by the Federal Financial Institutions Examination Council, an umbrella agency that includes the Federal Reserve and the Federal Deposit Insurance Corp. The guidelines included ways to do inventory and assessment on computer systems, the testing of these systems and the contingency planning should any of the networks fail.

"All, financial institutions in the United States were reviewed at least twice, if not more times," said Robert Johnson, assistant vice president of the Federal Reserve in Los Angeles. "Examiners from the Federal Reserve went into every institution to verify the requirements of FFEIC."

The results, Johnson said, have been overwhelmingly positive. According to the EDIC, the programming code of every bank in the United States has been found to be Y2K compliant -- except for one, the First Bank of Jacksonville in Florida.

Because of stringent government regulations, auditing the work of the programmers who dealt with banks has been fairly cut-and-dried, according to Michael Smith, a consultant with Deloitte & Touche LLP in Los Angeles.

"Financial services are one of the areas people should be most confident in, because they are very heavily regulated," he said." Look at it this way: At this point in time almost all loans, interest and payment calculations have to extend into the future, past the year 2000. By definition, those fixes have already gone through, or else those systems wouldn't work."

Setting priorities

Systems that would immediately impact the consumer, like loan information, checking, savings and credit card accounts, received top priority, Socha said.

Kirkpatrick said preparing for Y2K is by far the largest, most complicated endeavor his bank has ever undertaken. All 9,000 employees of the bank had something to do with getting the systems ready, whether they actually went through code and fixed it or tried to calm the frayed nerves of customers.

"There's nothing that's ever been this big or this important," Socha said. "It really meant, and I'm not kidding here, the survival of the bank to get this done. I hope nothing like it ever happens again."