payments applications. although we have no grounds for anticipating that specific failures could occur and we cannot act as an operational backstop for the nation ’ s financial industry, we view it as our responsibility to take action to ensure that we are as well positioned as possible to address major failures should they occur. we are currently focusing on contingency planning for external y2k - related disruptions, such as those affecting utility companies, telecommunications providers, large banks, and difficulties abroad that affect us markets or institutions. the federal reserve has established higher standards for testing institutions that serve as the backbone for the transactions that support domestic and international financial markets and whose failure could pose a systemic risk to the payments system. we recognize that, despite their best efforts, some depository institutions may experience operating difficulties, either as a result of their own computer problems or those of their customers, counterparties, or others. these problems could be manifested in a number of ways and could involve temporary funding difficulties. the federal reserve plans to be prepared to provide information to depository institutions on the balances in their accounts with us throughout the day, so that they can identify shortfalls and seek funding in the market. the system will also be prepared to lend in appropriate circumstances and with adequate collateral to depository institutions when market sources of funding are not reasonably available. our preparations for possible liquidity difficulties extend as well to the foreign bank branches and agencies in the us that may be adversely affected directly by their own computer systems or through difficulties caused by the linkage and dependence on their parent bank. such circumstances would necessitate coordination with the home country supervisor. moreover, consistent with current policy, foreign central banks will be expected to provide liquidity support to any of their banking organizations that experience a funding shortfall. closing remarks [UNK] to sum up, the macroeconomic effects of year 2000 preparations are quite complex. as i have discussed, some industries may benefit in the near term from increased sales associated with the accelerated pace of replacement of obsolete computer systems, and their customers presumably will have more productive systems in place sooner than might otherwise have been the case. but, in the aggregate, preparing for the y2k problem is likely exerting a slight drag on the us economy. the y2k problem, in effect, raises the rate of depreciation of the nation ’ s stock of plant and equipment. it forces businesses to devote additional programming resources simply to maintain the existing flow of services from its computers. as a provider of

international association of insurance supervisors. this meeting, which was attended by financial supervisors and representatives from the private sector from more than 50 countries, highlighted cross - border dependencies and the need for international cooperation to ensure that the issue is managed to minimize any disruptions and possible economic ramifications. as a result of the round table, a joint year 2000 council of financial regulators was formed with the first vice - president of the federal reserve bank of new york serving as the chair. the council will serve as a contact point between the financial market regulators and market participants including private sector groups specifically focused on international issues. it will also promote readiness, identify sound practices for dealing with the issue, and serve as a global clearing house on year 2000 issues more generally. a survey by the basle supervisors conducted late last year indicated that global awareness of the issue is increasing rapidly but that much work remains to be done. while most central banks and regulators express cautious optimism that their payments systems and financial [UNK] - 10 - institutions will generally be ready, there is increasing recognition that some problems are inevitable. to this end, increasing attention is being focused on the need to identify likely potential problems before reaching the century date change and to develop contingency plans to ensure the stability of global financial markets. the majority of foreign central banks are confident that payment and settlement applications under their management will be y2k ready. like the federal reserve, however, the operation of foreign central bank payment systems is dependent on compliant products from hardware and software suppliers and the readiness of telecommunication and electric power infrastructures. foreign central banks consider y2k readiness testing to be a critical and complex issue. the approach of foreign central banks toward raising banking industry awareness varies widely. we are aware that many european banks are stretched for resources as a result of the world - wide demand for information technology staff resources and their conversion to a single currency. similarly, asian financial institutions are focusing on their well - known problems, possibly placing full y2k preparations in jeopardy. 7. communications efforts we have been working intensively to address the issues faced by the industry and to formulate an effective communications program tailored to those issues. our public awareness program concentrates on communications with the financial services industry related to our y2k readiness, our testing efforts, and our overall concerns about the industry ’ s readiness. we have inaugurated a year 2000 industry newsletter, have published periodic bulletins addressing specific technical issues, and have established an internet web site that can be accessed at the