8 April 1999

The Chief Executive
All Authorised Institutions

Dear Sir/Madam,

Customer Awareness on Y2K

        In December 1998, the Hong Kong Monetary Authority (HKMA) issued guidance requiring your institution to conduct Y2K contingency planning, including the development of customer awareness on the Y2K issue.  I now write to provide specific suggestions to you for developing and implementing effective customer awareness programmes on the Y2K issue.  This is the first of a series of guidance notes on specific areas of Y2K contingency planning.

        As year 2000 approaches, it is almost certain that customers and the media will make increasing enquiries about the state of Y2K preparedness of the banking sector and individual institutions.  While the Hong Kong banking sector has been making very good progress in addressing the Y2K issue, which is well recognised by the international financial community as well as overseas regulators, this is not enough to address possible public perception problems.  A major threat of the Y2K problem is that it may degenerate into a public confidence issue, regardless of the actual preparedness of the institutions themselves.  Therefore, managing public perception is as important as managing the Y2K project itself.

        As confidence is built upon transparency and knowledge, the HKMA expects the management of all authorized institutions to regard the development of customer awareness programmes as a top priority in the coming months.  In this regard, the HKMA believes that institutions should take a proactive approach to reach out to customers rather than simply to answer customer questions as they arise.  This is particularly important for those institutions which have a retail customer base.  The HKMA recognises that the approaches to these programmes will differ among institutions having regard to their size, business operations and customer base.  However, your institution is expected to incorporate the following key considerations into the customer awareness programme:

• First, you should identify those customers who should be kept informed of your institution's progress in Y2K.  Customers may include retail and corporate depositors, borrowers, capital market and asset management counterparties and others who transact businesses with your institution.  Consideration should be given to targeting those customers who may be more easily influenced by sentiment.  Attention should also be given to those overseas customers who are not familiar with the Y2K progress of Hong Kong;

• Secondly, you should identify channels through which to communicate Y2K-related information about your institution.  The HKMA strongly recommends institutions to issue information pamphlets to customers, train front-line staff to respond to customer enquiries, post information in the offices' public areas or through monthly account statements, establish telephone hotlines and/or set up dedicated Internet web sites on the Y2K issue.  Some institutions may also wish to set up facilities to deal with the mass media to promote awareness of their Y2K progress; and

• Thirdly, you should anticipate and address issues that are of likely interest to customers. You are in the best position to judge your customers’ specific concerns (see below on some suggestions).  Subject to legal constraints, providing the best assurance you can on specific areas of concerns may be an effective means to prevent a confidence crisis.  Of course, you will have to be factually correct in the process.  In general, you are recommended to consult with your legal counsel before disclosing information about your Y2K progress to customers and the public.

        I should remind institutions that communication with customers on Y2K should in general be simple and clear.  Depending on the target audience, institutions may find some or all of the following elements of interest to their customers:

• The nature of the Y2K problem
  
  • causes of the problem
  • possible impact if not properly dealt with

• The institution's efforts
  
  • current and expected progress of the project
  • resources devoted to the project
  • senior management involvement
  • regulatory requirements (but not regulatory endorsement or certification)

• Data integrity
  
  • the institution's method and approach in ensuring data integrity

• Access to funds
  
  • customers' ability to draw cash at ATMs
  • customers' ability to use credit cards and other payment instruments
  • customers' and AIs' ability to clear cheques
  • continuity in executing autopay instructions

• Methods to contact the institution to obtain more information

        At present, there are indications that the major areas of concern to customers are data integrity/accuracy and access to funds by retail customers.  It is important that you train your front-line staff to answer simple enquires by customers, e.g. whether they need to withdraw their deposits before year 2000, whether they need to obtain evidence of their bank balances before the year end?  Customer concerns may change over time and you should anticipate and address likely concerns to customers as part of your institution's awareness programme.

        The HKMA expects your institution, if it has not done so already, to complete the development of a customer awareness programme on the Y2K issue commensurable with its size, business operations and customer base by end-June 1999 the latest.  The programme should contain at least the following :

• The objectives of the programme

• The strategy deployed to achieve the objectives including targeting customer groups, communication channels used, etc.

• The methodology used to ascertain customer concerns

• The methodology used to gauge the effectiveness of the programme

        The timing for implementation of the programme should be part of the strategy and is up to individual institutions' discretion.  In drawing up the objectives and strategy, institutions are not encouraged to use Y2K readiness as a competitive point.  Institutions should not seek to undermine confidence in other participants in the market as this is almost certain to backfire given the nature of the Y2K problem.

        It should also be remembered that promoting customer awareness is an ongoing process and your institution should continue to modify and update its programme in the light of changing circumstances and other new concerns and developments.  In the coming months, we will review the adequacy of the institutions' work in this area as part of our Y2K on-site examination.

        The HKMA has also incorporated the development of public relation and communication strategies into its own Y2K contingency plan for systemic risks.  It should be made clear that the HKMA's efforts are directed primarily at promoting awareness among the local and international communities in general.  It remains the full responsibility of individual institutions to communicate directly with their customers on their Y2K progress.  We will shortly commence our public relation and communication efforts on Y2K.

        We will issue further guidance to institutions on issues relating to customer awareness in the coming months if needed.  Should you have any questions in the meantime, please contact Mr. Brian Lee at 2878-1651 or Mr. Vincent Lee at 2878-1384.
 

Yours faithfully,
 

(D T R Carse)
Deputy Chief Executive

c.c.   Chairman, HKAB
         Chairman, DTCA
         Secretary for Financial Services (Attn: Miss Vivian Lau)