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Georgia bank censured for poor computers

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In the first of what could become a series of tough actions against banks whose computers are not ready to handle dates beyond 1999, regulators reprimanded a small Georgia banking company Monday for having inadequate computer systems.

The Federal Reserve, the Federal Deposit Insurance Corp. and the Georgia Department of Banking and Finance all issued cease-and-desist orders against the company, the Putnam-Greene Financial Corp., which is based in Eatonton, Ga., and has $200 million in assets. Earlier this year, balances were not updated for a full week because of problems with its computers. After an investigation, regulators ordered the company to begin following a wide range of prudent computer practices. In particular, they referred to the company's apparent lack of preparation for problems that are expected in computer programs that have not been modified to process dates after Jan. 1, 2000.In a cease-and-desist order - one of the harshest reprimands regulators can hand out before levying penalties - Putnam-Greene was told to end a long list of practices that included operating "with inadequate and unreliable electronic information systems." It was also ordered to upgrade its systems and insure proper backup and disaster recovery policies. Putnam-Greene officials said they had already addressed the most serious problems and were at work on the remaining issues.

Because of short cuts taken in the past by software programmers throughout the computer world, many systems still in use can read only the last two digits of the year - "75," for example, instead of 1975. If not corrected through a painstaking process, the software in such computers will read the "00" in 2000 as the year 1900, resulting in all sorts of miscalculations. This problem could be especially disruptive for the banking industry, which has spent billions of dollars to enable its computers to handle dates in the new millennium. Most major U.S. banks are expected to be prepared to enter the next century, but experts say many foreign banks and smaller ones in this country are so far behind that many risk grinding to a halt.

The banking authorities have set a strict schedule for financial institutions to prepare their computers by next year so that all the systems can be tested in 1999. The regulators expect to examine each institution by the middle of next year to see if they are meeting the schedule.