UK Companies Are Found Unprepared for Y2K
June 28, 1999
LONDON - A few key British financial services companies - including unit trust fund management groups - are at serious risk of failing to comply with requirements to reprogram their computers for the turn of the century, according to the UK's chief financial services industry watchdog, the Financial Services Authority (FSA).
The FSA, which regulates more than 8,000 firms, further estimates that several hundred more financial services providers are still behind in their attempts to prevent major computer problems arising. But, these companies are likely to be in compliance by the end of this year, the FSA said.
Those who are behind schedule include securities houses, fund management groups, banks and other groups for whom the FSA believes an interruption in business would have a serious impact on consumers and market stability.
All financial services companies have been required to disclose to the regulator what steps they have taken to ensure their systems are not disrupted in January 2000. They have also been ordered to check their systems with those of other institutions such as the London Stock Exchange.
Firms that the FSA has deemed in danger of failing to resolve problems have been instructed to either prove that regulators have inaccurately assessed them as being unprepared or rapidly produce a convincing plan to address their problems, said Michael Foot, head of financial supervision at the FSA.
As a last resort, the FSA has the power to restrict a firm's business or to remove the firm's authorization to conduct business altogether. But, Foot said such draconian measures would only be used if policyholders or investors appeared to be unprotected and at risk of financial loss.
The UK's fund management and insurance industries insist that they are among the best prepared sectors, having spent vast sums of money improving their information technology systems in the past few years. And many European managers say that because their computer systems were upgraded or replaced to cope with the introduction of the euro at the start of this year, they too are well prepared for the turn of the century.
Across Europe, money managers' investments on portfolio management and accounting technology have been increasing at a 12 percent annual rate, according to the Tower Group, an information technology consultancy. Currently, money managers spend about $155 million annually on portfolio management and information technology, the consultants said.
Nonetheless, IT analysts say that the implementation of the euro delayed many projects devoted to resolving year 2000 problems and that many European companies trail behind their US peers.
The UK, however, where spending on IT has soared in the past decade, is more advanced than the rest of Europe in its preparations, according to IT analysts and regulators. This is partly because UK managers are increasingly using technology to manage and track portfolios and to cope with demand from investors for detailed information. Both back and front office hardware and software systems have been upgraded to cope. Systems have also been changed to adapt to the Internet.
Among public companies, high quality, large capitalization companies are believed to be well prepared. But, small- and many medium-sized companies and in particular transportation and healthcare companies, are likely to have started late on their Y2K preprations or entirely lack appropriate plans to remedy their positions, said Sarasin Investment Management in London.
Many large UK companies, for example Boots, the retailer based in Nottingham, have begun to include notes on their year 2000 preparations in their annual reports.