Federal banking regulators take their duties seriously, very seriously. They're so careful--and sometimes so argumentative among themselves--that it can take up to 10 years to issue a rule. But Y2K's fixed deadline has induced regulatory harmony.

Since 1996, on a fairly timely basis, the regulators of the nation's financial institutions have agreed to--and distributed--Y2K policy statements, examination procedures and checklists for banks and thrifts to follow to ensure that their computer systems won't break down Jan. 1, 2000.

"Just the fact that five banking regulators were able to agree on this much stuff in this time period is really fairly spectacular," said Ellen Seidman, director of the federal Office of Thrift Supervision.

The regulators operated under the umbrella of an interagency group known as the Federal Financial Institutions Examination Council. The group's members include the Federal Deposit Insurance Corp., the Office of the Comptroller of the Currency, the Board of Governors of the Federal Reserve System, the Office of Thrift Supervision and the National Credit Union Administration.

The group issued a series of "interagency statements" designed to alert the financial world to Y2K risks and to hint that the regulators would use their clout if banks and savings institutions failed to address the computer date glitch seriously.

Now, months later, these statements reflect the history of Y2K and how many federal agencies reached out to their private sector counterparts to promote better awareness of the Y2K problem.

In June 1996, the interagency statement was titled "The Effect of Year 2000 on Computer Systems." By December 1997, a new title read "Safety and Soundness Guidelines Concerning the Year 2000 Business Risk." In April 1998, the group focused on testing Y2K fixes; the next month's statement focused on contingency planning. By August, the regulators were answering non-financial questions, such as whether testing could be eliminated if the software used an eight-digit date field. In short, the reply was "no."

By September 1999, the regulators were ready to hold a news conference at the National Press Club and announce that 99.7 percent of the nation's banks, thrifts and credit unions were prepared for the date change.

Y2K, Seidman said, moved technology "from the basement to the management offices and into the boards of directors. . . . When we go in . . . we don't want to be told, 'Go visit Joe in the basement.' We want to see that management and the board understand what it's all about.

"And the institutions that have lagged along the way, that is almost always where they've lagged. The board hasn't given it sufficient attention," she said.

Once the board got involved in Y2K, Seidman added, "in 9.9 out of 10 cases, that was the end of any need to worry about the institution. They caught up."

Earlier this month, the White House Y2K council and its financial sector group, chaired by Stephen R. Malphrus of the Fed staff, sponsored a workshop to discuss potential security threats posed by computer hackers or others targeting the "back doors" of systems during the Y2K transition.

The session was basically a reminder that agencies and companies need to be more careful about who gets access to systems and passwords.

"This is one of those things where it's better safe than sorry," Seidman said.

U.N. Center Expects 'Moderate' Effect

The international center created by the United Nations to monitor Year 2000 problems said yesterday "there will be many Y2K-caused errors" around the world but "the combined negative effect of these errors will be moderate."

In its report, the Washington-based International Y2K Cooperation Center said it expects "few serious Y2K-caused effects" in critical sectors, such as energy, telecommunications and finance. But the center said public health and safety could be at risk in developing countries during the opening days of January.

A Late-Developing Picture

On New Year's Eve, the U.S. government will likely be focused on obtaining Y2K reports from abroad, but "we should not assume that what happens there happens here," John A. Koskinen, the president's Y2K adviser, said yesterday.

In fact, he said, getting a "pretty good picture" of Y2K's magnitude may prove elusive until toward the end of the first week in January. By then, governments, companies and stock markets will have had time to assess any problems.

Koskinen issued a "benchmarks" fact sheet showing "what normally happens on a given day"--a polite way of saying that computers break down all the time and that the public needs to be careful not to presume electronic malfunctions over New Year's Day automatically equate to Y2K glitches.

For example, Koskinen said, 1 percent to 2 percent of all automated teller machines are broken at any one time and about 10 percent of credit card transactions fail routinely. The share of gasoline stations normally closed on New Year's Day ranges from zero to 15 percent, depending on the company or operator.

Koskinen will be briefing reporters on Y2K issues during the New Year's holiday weekend. His aides have received more than 700 media requests for credentials to his command center.