I.   Year 2000 Readiness of Financial Institutions

In compliance with the order entitled "Submission of Materials Regarding Efforts to Deal with the Year 2000 Problem," dated September 3, 1999, issued pursuant to Article 24, Paragraph 1 of the Banking Law, etc., a total of 1,524 financial institutions (deposit-taking financial institutions, insurance companies, securities companies, and investment trust management companies) submitted reports on their year 2000 readiness as of the end of September 1999. The following is a composite summary of these reports. The same reports on year 2000 readiness are required to be submitted at the end of every month from September onwards.

• Modifications and internal testing had been completed by 99% of all financial institutions (96% as of the end of June) in the case of important systems, and by 98% (83%) in the case of systems other than important systems.
  The financial institutions that had not completed modifications and internal testing of important systems by the end of September have undertaken to do so by the end of October.
  
  
• External connection tests with BOJ-NET, the Zengin System, exchanges, etc., had been completed by 89% (78%) of all institutions. Confirmation tests of BOJ-NET, the Zengin System, and other settlement and transactions systems are planned to be conducted on January 2, 2000.
  
  
• With regard to the preparation of contingency plans, 99% (94%) of all financial institutions had completed these. In addition, 96% of all institutions stated that they were conducting simulation drills based on contingency plans, and that by means of these tests they were endeavoring to further improve their contingency plans.
  
  
• Of all financial institutions, 99% stated that, over the rollover period, some of their employees--averaging nearly 200 per institution--would come in to work expressly to deal with the year 2000 problem. In the case of the major banks, this number will average more than 2,000. Specifically, 99% of all financial institutions will make data backup at the year-end, and 92% will confirm the startup of their systems on January 1.

II.   Action Taken after Receipt of Reports

These reports show that, as of the end of September, most financial institutions had completed system modification and testing and had prepared contingency plans, which suggests that the addressing of the year 2000 problem is entering its final phase. Nevertheless, as of the end of September there remained some financial institutions that had not yet completed these tasks.

In view of the importance of this problem, the Financial Supervisory Agency (FSA) will strengthen measures such as monitoring on financial institutions, and it will rigorously implement all necessary measures under the Banking Law, etc., with regard to any institutions that it deems are having problems in carrying out their compliance measures. In line with this policy, the FSA is currently requiring improvements under the relevant applicable laws, of 4 institutions (2 shinkin banks, 2 foreign securities companies) that stated that they would not complete the modification and testing of systems other than important systems until November or later, and had not prepared contingency plans. In addition, 89 institutions are now being requested to submit supplementary reports pursuant to Article 24, of the Banking Law, etc.

III.   Measures Taken by the FSA

The FSA has been addressing the year 2000 problem vigorously and comprehensively. To date it has established the "Y2K Task Force" to act as an internal agency-wide organization, and has been participating in various measures being taken by the government. Other activities include liaison and coordination with other ministries and agencies and with industry bodies and network operators, and inspections and monitoring on financial institutions. In addition, in September and October this year it conducted simulation drills in communicating information for financial institutions and industry bodies and other organizations. These efforts will be strengthened still further, and more of these simulation drills are planned.

As mentioned in item I. above, almost all financial institutions will be staffed over the rollover period to deal with the problem. Similarly, the FSA intends to have the responsible staff in all sections, in particular the Y2K Task Force, working from December 29 to January 3, to gather information from financial institutions and deal with any problems that might occur at those institutions, and to liaise and coordinate with related ministries, agencies, and other institutions in Japan, and with supervisory authorities overseas.

In the short period of little more than 50 days remaining before the year 2000, the FSA will continue to ensure that it will have a flawless structure for dealing with the problem toward the rollover period.

(Appendix)