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Year 2000 advice

Document date:  Thu 30 Sep 1999
Published:  Thu 30 Sep 1999 00:00:00
Document No:  152900
Document part:  A
Market Flag:  N
Classification: 

HOMEX - Melbourne                                                     

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ANZ'S YEAR 2000 STATEMENT AS AT END OF AUGUST 1999

This is a statement of ANZ's position on the Year 2000 issue as at
the end of August 1999, released in September 1999 to the Australian
Stock Exchange, the New Zealand Stock Exchange and the New York Stock
Exchange. 

Overview

Australia and New Zealand Banking Group Limited and each of its

ANZ can now confirm for its customers that:

* Deposits in ANZ's customers' bank accounts are safe from loss due
to Year 2000 problems. ANZ's daily processes ensure that all
electronic customer account details are always carefully recorded and
stored. If there were any problems, the backup systems (both
electronic and paper) would provide the information required to
restore account records.

* It should not be necessary to withdraw substantial extra amounts of
cash before 31 December 1999. ANZ acknowledges that some customers
might choose to take out a little extra cash if they are concerned,
so extra supplies will be available. However, customers should be
aware of the risks to their personal safety and security associated
with holding large amounts of physical cash-the safest place for
their money is in their ANZ bank account.

* ANZ expects it to be business as usual for the operation of its own
facilities for transactions (such as direct credits and debits, bill
payments, EFTPOS and ATM cash withdrawals, and ANZ Internet Banking
for Australian accounts). ANZ is working with key suppliers,
reviewing their progress on Year 2000 preparations and developing its
own plans to deal with any potential risks that might affect the
provision of services to customers.

Changes since previous statement

This statement updates ANZ's previous Year 2000 statement (as at the
end of February 1999) to the Australian Stock Exchange, the New
Zealand Stock Exchange and the New York Stock Exchange. 

There has been no material change to ANZ's assessment of its overall 
potential exposure to the Year 2000 problem.

Whilst ANZ's Year 2000 plans are modified where necessary to deal
with emerging issues, there have been no material deviations to the
planned activities as described in the previous statement.

In May 1999, ANZ Panin acquired the cards operations from PT Bank
Papan Sejahtera in Asia. The associated systems have been transferred
to the ANZ environment and internal Year 2000 testing completed. 

What have we done so far?

So far, ANZ has:

* Set up a centralised Group 2000 Project team (in 1996) 

* Committed a budget of A$200 million (in 1997), later revised to 
  A$183 million (in 1998) 
* Completed an inventory of all systems, hardware, software, vendors, 
  equipment and buildings, across 43 countries and all ANZ-controlled 
  subsidiaries (in 1997) 
* Completed repair and internal testing of ANZ's own applications (by 
  the end of 1998) 
* Completed a thorough review of third-party provided products and
  services, and conducted testing where necessary 
* Completed a review of our key suppliers' Year 2000 preparations and 
  developed plans to deal with any potential risks 
* Completed remediation and testing for all ANZ's critical, and the 
  majority of non-critical, buildings world-wide 
* Completed a major program of end-to-end testing of ANZ products and 
  services, both within ANZ and with external entities, eg other 
  banks, financial industry regulators, service providers 
* Commenced a testing program with selected customers that will
  continue throughout 1999 
* Worked with a significant proportion of business customers to help 
  them understand the risks of Year 2000, and how they might prepare 
  themselves 
* Put processes in place to assess and to minimise Year 2000 credit 
  risks 
* Assisted with establishing forums to work with other banks on 
  common issues 
* Revised business continuity plans to take Year 2000 issues into
  account 
* Established a process to minimise the impact of system changes and 
  new developments on Year-2000-tested systems, while balancing the 
  need for business innovation to retain competitiveness 
* Set up a 'Managing the Event' team to coordinate ANZ's activities
  during the transition to 2000.

What more do we need to do?

The following activities are planned for the remainder of 1999 and
the early part of 2000: 

* Continue testing with selected customers and undertake further 
  regulator testing as required 
* For all new software applications developed, continue to thoroughly 
  test both internally and on an 'end-to-end' basis 
* Conduct final tests and introduce a change freeze during the latter 
  part of 1999 and early 2000, covering all ANZ systems (to protect 
  the integrity of repaired systems) 
* Continue communicating with customers, particularly consumers, to 
  let them know that ANZ is managing the issue and to provide 
  information to assist in their own preparations 
* Complete remediation and testing of the remaining non-critical 
  buildings world-wide 
* Complete any further business continuity plan revisions needed, and 
  test revised plans 
* Continue to manage known risks (including settlement risks) and 
  prepare, as much as possible, for unforeseen events.

The following table outlines external testing currently scheduled to
be completed. Further testing may be scheduled if required.

Country        Description                             Completion date

Australia      Derivatives & Options Trading           Sep 1999
               Facility (CLICK) and Derivatives 
               Clearing System (DCS) tests

               Dependent upon the provision of the 
               appropriate test environment by 
               ASX Limited

Can we be sure nothing will go wrong?

Whilst ANZ can confirm that deposits in customers' bank accounts and
complexity and interdependencies of the financial systems and parties
or services we connect to for every day business. However, we deal
with these sorts of issues every day in the normal course of
business. The Year 2000 issue per se has not been encountered before
and there may be a greater chance than usual of problems occurring.
ANZ is working hard with the objective of maintaining normal banking
services but elements of risk regarding events and supplies will
still exist. Therefore, outcomes cannot be predicted with absolute
certainty. We are also aware of the risk that significantly changed
customer behaviour over the transition may present to the smooth
running of our systems and we are working to address this.

Managing the transition

ANZ recognises the uncertainties referred to above as a source of
risk over the transition to Year 2000, although the magnitude of that
risk is difficult to determine. Therefore, ANZ's risk management
plans include reviewing Year 2000 internal and external dependencies
and establishing appropriate contingency plans. 

ANZ has numerous recovery/continuity plans for different group 
companies and market sectors. ANZ has enhanced these plans for Year 
2000 and is in the process of testing them. Problems leading up to 
the Year 2000 are being managed as part of the business continuity 
process. 

In addition, efforts are being made to manage exposures including
those related to countries where the general level of preparedness
may be below Australian and New Zealand standards. Again, we are
prepared to deal with issues as they may arise but credit losses due
to our customers encountering operational difficulties are
nevertheless possible. 

As a special focus for the transition period, ANZ has established a 
'Managing the Event' (Situation Management) team to manage any 
problems that may occur which cannot be mitigated in advance.

In summary, ANZ is committed to identifying and addressing
Year-2000-specific issues throughout its operations. ANZ's aim is to
minimise the effect on its customers and business partners of any
problems ANZ might encounter in the transition to Year 2000.

How much have we spent?

The estimate for total capital and operating cost to ANZ for the
period until April 2000 is A$183 million. The amount spent to the end
of August 1999 is A$128.9 million. ANZ anticipates that it will
complete the project within budget. Over 700 person years of effort
had been expended on Year 2000 activities as at the end of August
1999.

The cost includes a 15 per cent contingency and covers activities
associated with preparing for Year 2000, including internal system
repair and testing, vendor management, contingency planning,
communication, risk management and Managing the Event.

What about the banking industry?

ANZ's Year 2000 preparations have involved working with banks both in
our home markets and around the world. In Australia and New Zealand,
Year 2000 interbank working groups have been formed, and ANZ is an
active participant.

ANZ now has business operations in 39 countries, and has
relationships with overseas regulators, banks, industry bodies and
working groups. Industry bodies in several countries have established
Year 2000 working groups, similar to those in Australia and New
Zealand, and ANZ is an active participant in many of these groups.
ANZ, through the Australian Interbank Working Group, is contributing
to the activities of the Global 2000 Coordinating Group.

In Australia and New Zealand, full end-to-end interbank testing and
retesting of payment streams intended to ensure the integrity of the
payments systems has been completed. ANZ will be participating in
Australian Payments Clearing Association (APCA) 'preservation' tests
which are designed to ensure that the integrity of systems is not
adversely affected by any changes made since initial testing. ANZ has
also participated in testing on an international level including
global payments testing and Custody 2000 testing.


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