AL 97-6

Subject:  Year 2000 Issues and Examination Approach

TO:  Chief Executive Officers of all National Banks, Department
     and Division Heads, and all Examining Personnel  



This advisory is to alert bankers and examiners to the recent
FFIEC Interagency Statement and examiner guidance outlining broad
measures banks need to take to operate efficient computer systems
beyond the Year 2000.  Also attached to the FFIEC statement is a
questionnaire for examiners to assess the industry's current
state of readiness to meet Year 2000 goals.

The maintenance of safe and sound banking practices requires that
institutions take appropriate steps to address Year 2000 issues. 
These guidelines are intended to provide a description of
appropriate and prudential practices that should be considered as
an institution develops and implements its Year 2000 conversion
program.

The OCC's review of  Year 2000 preparations will take into
account the effect connections to outside systems will have on
the bank.  This includes vendors and service providers as well as
clearing houses, governmental entities, customers, and other
financial institutions.  It also will cover environmental systems
that use microchips, such as security systems, elevators, and
vaults.  In addition, the OCC will consider bank lending
practices to ensure that they are evaluating the effect that Year
2000 compliance may have on creditworthiness. 

Once the OCC's initial industry assessment is completed sometime
this summer, the OCC will prioritize examinations according to
each bank's state of readiness, and work with institutions that
are having trouble.  Examinations of  all national banks will be
completed by mid-1998, and follow-up visits will be scheduled
where necessary. The OCC wants to see that banks can complete
programming changes for mission-critical systems and have testing
well underway by December 31, 1998.  We will want assurances that
banks that purchase all their software or contract out their
processing operations perform appropriate due-diligence reviews
to make certain their suppliers are Year 2000 compliant.


The OCC is particularly concerned that banks have comprehensive
plans and a clear commitment to meet Year 2000 goals.  Special
attention will be focused on  whether senior management and the
board of directors are fully engaged in the planning and
monitoring of Year 2000 conversion efforts.

For further information on Year 2000 issues, contact the Bank
Technology unit at (202) 874-2340.





                                     
James D. Kamihachi
Senior Deputy Comptroller
Economics and Policy Analysis
Date: May 16, 1997

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