Survey gives consumers incomplete Y2K assessment

Northwestern Financial Review, Feb 27, 1999 by Bengtson, Tom

News, Comments, & Extras

Imagine responding to a knock at the door and discovering a person who says: "Give me what I want or I will spread rumors about you."

How would this kind of intimidation make you feel? If you are a banker, you don't have to be very imaginative to figure out how it feels because that is pretty much what Weiss Ratings, Inc., is doing to the banking industry.

I received a Feb. 10 press release from the Palm Beach Gardens, Fla., company that said 32 percent of 909 banks that responded to their Y2K survey reported missing "critical" deadlines for testing. The press release further reported that 20 percent of the respondents "do not anticipate completion until March." Weiss Ratings says this implies a failure to comply with federal requirements.

Now here is where the intimidation comes in. Company President Martin Weiss says in the press release: "We must assume that, on average, institutions that did not respond to our survey are more likely to be late in fixing their Y2K problems than those that did."

So Weiss is saying, give me what I want (fill out my survey) or I will make libelous statements about you.

I assume many newspapers picked up the press release and wrote stories about it, especially since Weiss says his survey results contradict FDIC reports that say 98 percent of the industry is on track to solving potential Y2K problems.

Of course, what Weiss is really trying to do is make money. By writing this kind of a press release, Weiss Ratings is playing on public fear. He notes at the bottom of his press release that consumers can obtain a Y2K rating on their bank for $1 5. '

On March 8, Weiss Ratings will issue complete results from its nationwide survey. Look for another press release to hit the streets about that time.

John "Jack" Misiewicz, regional director for the FDIC's corporate division of compliance and consumer affairs, told a group of Minnesota bankers recently that the FDIC has receive several telephone calls about Weiss Ratings. He noted the firm has not done anything illegal, but that it is pushing the envelope for ethical business practice. He said the FDIC is continuing to monitor Weiss Ratings.

Mary Ellen Domeier of State Bank & Trust Co., of New Ulm, Minn., also speaking at the Minnesota Bankers Association Executive Seminar on Feb. 16, said her bank received a low rating from Weiss. She found out about it when a computer vendor referred to the survey in a letter asking if they could help the bank with its Y2K computer needs. The rating came as a complete surprise to Domeier, as she said her bank is right on schedule for meeting Y2K compliance guidelines. The notion that the Weiss Ratings are publicly available to existing and potential customers is troubling, Domeier said. When Domeier asked the 75 or so bankers in the room how many had completed the Weiss Ratings survey, only a small number of hands went up.

Thomas Toft, assistant deputy comptroller for bank supervision for the OCC, told bankers at the same meeting that there have been many negative stories in the press about the banking industry's Y2K readiness and that the "negative articles are only going to continue." He noted this is extremely unfair considering most banks are Y2K compliant and that the industry, as a whole, is far ahead of most other industries in Y2K readiness.

It is too bad Weiss Ratings is being so opportunistic about assessing the banking industry's Y2K readiness. The truth is, consumers can benefit from genuine, third-party Y2K assessment of all industries, not just banking. Unless a number of industries are assessed together, the consumer has no point of reference for judging how a particular company is doing. That's part of the problem looking only at banks in such a survey. Extras...

Ironically, bankers testified recently before Congress on their Y2K preparedness. On Feb. 24, a Salt Lake City banker speaking on behalf of the American Bankers Association, told the House Ways and Means Committee that the industry has invested billions of dollars and thousands of hours making sure its systems will work and customer accounts will be safe on Jan. 1, 2000.

The following banks recently received an "outstanding" rating for CRA compliance: Iowa - Manufacturers Bank & Trust, Forest City; Security Savings Bank, Larchwood; Maquoketa State Bank; Moorhead State Bank; Community State Bank, Tipton; and First Trust and Savings Bank, Wheatland. Minnesota - State Bank of Morristown. North Dakota - Dakota Community Bank, Hebron. Illinois State Bank of Graymont; and Bank of Rantoul.

This year's "National Teach Children To Save Day" is set for Tuesday, April 20. About 2,500 bankers commemorated the day last year by making 5,000 presentations to 125,000 students. The day is promoted by ABA's Education Foundation.

President Clinton's fiscal year 2000 budget includes $994.5 million for the Small Business Administration, compared to $820 million budgeted for 1999.