Speaking today at Action 2000's National Infrastructure Forum, managing director of the Financial Services Authority (FSA) Michael Foot warned that the time for tough decisions was approaching if customers' interests were to be protected. Another review of progress is expected in the autumn.
"When and where needed, regulatory action will follow," Foot threatened.
Currently, under Action 2000's colour-coded system of measuring Y2K preparedness, 66 percent of high impact financial services are blue (no risk of bug disruption), 32 percent are amber (some risk) and 2 percent are red (severe risk).
The FSA's remit covers high-street banks, insurance companies, building societies, stockbrokers and investment banks. 450 firms have been identified as companies that will impact their sector, the survey found.
The Authority has the power to restrict new business, force firms to transfer clients to Y2K compliant companies and, in the worse case scenario, close businesses. An FSA spokesman described a "forced merger" as the most likely outcome of firms still in Action 2000's red category by the end of September.
The FSA has backed down from naming and shaming the laggards at this stage. Foot claimed it would not be in the interests of policy-holders, depositors and investors. "It's a question of how you square naming with the gratuitous lack of confidence such naming would bring about," he said. Questioned on why eight major financial institutions are still not up to speed on the bug, Foot blamed the complexity of the task. "It is no Mickey Mouse job getting systems ready. It is a huge amount of work and money," he said.
Foot highlighted the 66 percent of companies that have completed their Year 2000 programmes and reassured customers that assets would be protected under existing compensation policies. He is confident there will be no major disruptions for customers. "I shall not be cancelling policies or taking money out and putting it under the bed," he said.
Spokespeople from both the NatWest and Lloyds TSB claimed it would "be business as usual" come Dec 31, 1999. It is not thought any major high-street bank is among the eight red-listed companies