(Nikkei BP Group)
(No.1 High-Tech News Site in Japanese)
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| Banks Seek to Comply with Y2K Amid Financial Upheaval
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November 6, 1998 (KUALA LUMPUR) -- Malaysia is confident that its finance,
banking and insurance companies will be Year 2000-compliant by Dec.
31, 1998, a full year before the Y2K computer software problem must
be resolved.
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But even as financial institutions strive to meet the government-imposed
deadline, experts are concerned that it may be too late for their corporate
customers.
A Securities Commission report indicated that only 93 companies or 12.7
percent of 734 companies listed on the Kuala Lumpur Stock Exchange were
Y2K compliant as of Sept. 24. The official national registry of Y2K-compliant
companies, which was set up in May on the Internet at www.y2k.gov.my,
has yet to register a single company.
The government recently admitted that it may have underestimated the
complexity of the Y2K problem.
Energy, telecommunications and posts minister Leo Moggie, who also heads
the National Y2K Steering Committee, said the initial allocation of
30 million ringgit for the Malaysian Administrative and Management Planning
Unit (Mampu) to tackle the Y2K bug for the public sector was "insufficient."
Even a new allocation of 100 million ringgit (US$26.3 million) announced
in the 1999 National Budget in October was said to be inadequate by
computer vendors.
Alan Fung, executive director of the Association of the Computer Industry
Malaysia, said the allocation was "far too small" to address the problem
faced by the numerous ministries, departments and agencies.
On the banking front, most financial institutions have indicated that
they are moving toward completion of their individual company-wide Y2K
projects.
A recent survey conducted by Merrill Lynch & Co., Inc. to gauge Y2K readiness
of banks in the Asia-Pacific region concludes that banks were generally
well-prepared despite the economic slowdown.
Six major banks in Malaysia, it stated, are spending US$67.3 million
to tackle the problem, and they will be compliant as early as December
1998 and as late as June 1999.
But the survey failed to acknowledge that Malaysia's banking industry
is in a state of unusual flux. Banks and financial companies in the
country are either restructuring, merging or being absorbed by parent
companies and some have very high levels of debt.
Also, the country is facing its first recession in a decade, and the
financial crisis has spilled over into the political arena.
Last month, Prime Minister Mahathir Mohamad fired his finance minister
Anwar Ibrahim, who was also deputy premier, and accepted resignations
of the governor and deputy governor of the central bank, Bank Negara.
Mahathir also assumed the role of First Finance Minister and has instituted
a series of drastic financial measures that have stunned the industry.
He has cut interest rates, set a fixed exchange rate of 3.80 ringgit
per dollar, rendered the ringgit non-convertible abroad, and imposed
curbs on short-term capital flows.
In the light of these and other developments, it is doubtful that the
Year 2000 problem is a high-priority item among bank managers caught
up in the financial and political upheaval. They must deal with regulatory
changes on almost a daily basis.
Mergers also make it difficult to implement corporate Y2K strategies.
For customers, the possibility of glitches causing chaos in the banking
system in 2000 is a frightening and real possibility. Y2K consultants
and solution providers predict that serious problems may arise.
"Although it is unlikely that the banking system will grind to a halt
in Malaysia, service is expected to be far from perfect with delays
in clearing checks and transferring money internationally," an expert
said.
Consultant Kenny Tay of Finet Associates Sdn Bhd said banks and financial
institutions must consider the credit risk posed by borrowers who still
think that the Y2K problem is a technical issue and not a business issue.
He urged banks and financial institutions to encourage borrowers to resolve
the problem to minimize the potential threat to their own loan portfolios.
Although awareness is picking up, smaller companies still do not see
the date roll-over problem as critical to their businesses.
"These companies are still waiting for the traditional silver bullet,
something they can download free from the Internet, but this will not
happen," said Billy Chia, managing director of Y2K solutions provider
Future Connections Sdn Bhd.
Chia, whose company sells the Australian-made Uniwell Millennium Bug
Toolkit, estimates that 80 percent of Malaysia's small and midsize companies
running older generation PCs, up to speeds of 100Mhz, are affected and
may need software fixes.
The economic crunch make matters worse for companies already struggling
to keep their businesses afloat.
"Most companies have not budgeted for Y2K solutions and are reluctant
to acknowledge that the expense is unavoidable, and the deadline is
non-negotiable," he said.
(Julian Matthews, Asia BizTech Correspondent)
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