Spotlight turns on millennium bug
Now the dust has settled on the euro and all it entailed for custodians and their clients, the spotlight turns to year 2000 problems, so that they get the attention they deserve. In London, the Custody 2000 working group has been set up by custodians and others to co-ordinate the preparation, while in New York a major custodian issued warnings to its sub-custodians about their readiness.
Leading custodian banks, broker/dealers and international securities depositories have come together to form the group, with the aim of addressing the question of the readiness of transaction processing between global custodian, broker/ dealers and sub-custodians. The group says such industry-wide co-ordination could be easily adopted by other parts of the financial industry.
The foundation of the group's strategy is a standard test based on the Swift common messaging protocol. This means the concept is easily transportable amongst other industry participants. A programme of action steps" has been agreed, involving the preparation and carrying out of tests over a period to the end of September. So far around 23 organisations involved in custody and depositary activities have joined. The formation meeting was held at Paribas in London.
Meanwhile, in New York, Bank of New York says it has largely completed its Y2K preparation and testing of "mission-critical" systems. The bank adds that it is now operating compliant systems in these areas and is ready to test with selected customers.
Programs are in place to monitor its third party vendors, service providers and major borrowers to evaluate how they are managing the Y2K issues, as well as the "compliance efforts" of major correspondents, sub-custodians and business partners. In a stark warning, BoNY says sub-custodians, correspondents and service providers will be replaced if they are not seen to be managing the problems adequately. This can also happen if the bank believes that "severe risks are associated with continuing use of that entity". Fennell Betson"