The US Treasury cannot rule out possible disruptions to the economy from system failures due to the Year 2000 (Y2K) problem, it has admitted.
Although the US has made good progress on fixing the Y2K issue, Lawrence Summers, deputy secretary at the US Treasury, testified to Congress' Special Committee on the Year 2000 that countries should use risk management to ensure priority systems would continue to work and contingency plans were in place to cope with failures.
"Unless fixed, Year 2000 problems will pervade every aspect of our financial systems?if failures are widespread, they can pose a threat to central markets such as an exchange or clearing house," he warned.
The UK has also had a Select Committee investigating the issue but it has been much less proactive than the US.
Summers noted that the US was leading the way in ensuring Y2K compliance. Its financial regulator, the Securities and Exchange Commission, now requires publicly quoted companies to disclose their Year 2000 readiness and problems in some detail.
US government departments have also been required to report on their compliance status, but for the rest of the world analysts have warned that many government systems will not be compliant. Up to 40 per cent of systems in European countries will not be ready, according to Gartner Group.
A number of senior US government figures have already testified to Congress that the symbiotic nature of global economies could mean problems come in 2000 even for countries that are 100 per cent compliant.
"The key is to manage the risks, by prioritising those systems which absolutely must be in working order while devoting lesser resources to other areas, and putting in place appropriate contingency arrangements to reduce the harm of any failures that do occur," said Summers.
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