26 July 1999

The Chief Executive
All authorized institutions

Dear Sir/Madam,

Guidance Note on Year 2000 Contingency Planning No. 4/99
Event Management Centre for
the Rollover to Year 2000 ("Y2K") Critical Dates

I am writing to provide specific suggestions to you on the establishment of an Event Management Centre¹ by your institution for the purpose of managing the smooth rollover to Y2K critical dates. This is the fourth of a series of guidance notes on specific areas of Y2K contingency planning.

Event Management Centres ("EMC" of Authorized Institutions ("AIs")

As mentioned in my letter of 14 December 1998, your institution will need to establish an EMC for management and co-ordination of quick detection of, and response to, Y2K related problems in relation to its internal systems as well as the external environment around Y2K critical dates. At a minimum, these should include 9.9.1999², 1.1.2000³ and 29.2.2000. While the exact set-up of the EMC will depend upon your institution's business, operations and branch network, the EMC is expected to proactively monitor the actual performance of your institution and critical external dependencies, and to identify exceptions as early as possible on Y2K critical dates. This would enable your institution to take timely action to rectify any problems identified and respond to other material exceptions that may occur during those dates.

It is important for your institution to carefully plan and develop a full timetable of the activities to be performed by your institution and its EMC immediately before and after the changeover to the Y2K critical dates, especially on 1.1.2000. These should primarily cover system activities⁴ and "wellness check" activities to be performed during the changeover. "Wellness check" activities are a series of checks to assess whether your institution's critical systems and equipment at all important locations, as well as its critical external dependencies are operating as usual on Y2K critical dates. The wellness check results would help your institution to assess the impact of any Y2K problem on your institution and its ability to conduct business as usual on or after Y2K critical dates. I enclose at Annex A for your reference some specific suggestions on the wellness check activities. The timetable should list out all key activities, the planned start and end times of these activities and the responsible staff. Your institution is advised to rehearse these rollover activities to determine the likely time for each activity and to adjust the plan if the tasks to be done do not fit into the available time. AIs are expected to notify the relevant case officers of the HKMA in advance of their timetables of rollover activities, particularly the data back-up operations and wellness checks.

The Global 2000 Co-ordinating Group envisages that many Y2K related disruptions can be resolved bilaterally with the relevant business counterparties through their normal communication channels (provided that they are operating normally). AIs are advised to update their relevant contact lists in this connection. In case the normal communication channels are not available during the millennium weekend, AIs are also advised to establish effective bilateral communication channels between their EMCs and those of their key counterparties and pre-agree the issue resolution mechanisms during this period.

Given the important function of an EMC in co-ordinating effective response to exceptions, it is crucial for AIs to establish a robust EMC so that it could withstand as far as possible failures or disruption of services (e.g., electricity supply, telecommunication, building services). In essence, your institution needs to have a contingency plan to ensure that its EMC will be able to continue operating if such failures occur.

Reporting to the Hong Kong Monetary Authority ("HKMA")

The HKMA will also establish its EMC to monitor the smooth transition of the banking sector to Y2K critical dates and co-ordinate effective response to any systemic problems that may occur. The EMC of the HKMA will work closely with the Y2K Emergency Co-ordination Centres being established by the Government for the financial services sector and the community at large respectively, as well as the EMCs of other financial market authorities. The HKMA is working on an arrangement to collect relevant performance information of the Hong Kong public infrastructure facilities (e.g., electricity, telecommunications, water supply) and major shared financial systems (e.g., payment systems), as well as information about overseas situations which may affect the Hong Kong financial system. The HKMA considers that such information would be useful to the banking industry and individual institutions so that they can be aware of the performance of the external environment and their external dependencies during the Y2K changeover. The HKMA is therefore considering how best to share this information with the industry so as to reduce the workload of AIs in collecting such information.

Reporting requirements

As far as AIs are concerned, the HKMA requires the EMCs of all AIs to report information on the performance of the institutions, and any material exceptions they may encounter to the EMC of the HKMA during the following critical periods:

Period in which the EMC of the HKMA is in full operational mode

• From 18:00 of 8.9.1999 to 18:00 of 10.9.1999⁵;

• From 14:00 of 31.12.1999 to 18:00 of 4.1.2000; and

• From 18:00 of 28.2.2000 to 18:00 of 1.3.2000.

Period in which the EMC of the HKMA is in half operational mode

• From 09:00 of 5.1.2000 to 18:00 of 14.1.2000 (this is because some Y2K problems may only emerge in slower time after the century date change e.g. some system functionality or interfaces may not be put into use immediately after the century date change).

During these periods, AIs are expected to report to the HKMA the following two types of information:

1. Status reports about actual performance -- this covers periodic reports on the status of the data back-up operations and result of the wellness checks performed during the critical dates against the schedule previously notified to the HKMA, until these tasks are completed (please see Annex B for a standard template for reporting. Apart from these reports, the HKMA will contact AIs that have substantial retail operations or presence in the financial markets to monitor their performance and operations during the normal course of business around Y2K critical dates, particularly on 30.12.1999, 3.1.2000 and 4.1.2000); and
   
   
2. information about material exceptions -- this covers information about any material exceptions encountered by institutions, including system disruptions or other events that may materially affect services available to customers or other external parties, regardless of whether these exceptions are caused by the Y2K problem (please see Annex C for a standard template for reporting). Exceptions⁶ that can be expected to be rectified in the normal course of events without material impact generally should not be reported. If material exceptions happen during the Y2K critical dates (i.e. when the EMC of the HKMA is in operation), such reports should be made to the EMC of the HKMA. During any other time, such reports should be made to the relevant case officers of the HKMA or other designated officers (if this is outside office hours).

In respect of institutions incorporated in Hong Kong, the conditions of their major overseas branches should be reported through their Hong Kong head offices. Regarding Hong Kong branches of foreign institutions, they should report the status of the critical systems that support the key operations of the branches, regardless of whether the systems are located in the Hong Kong branches or their overseas offices, or whether the systems are operated by outsourcing service providers. For those systems operated by other overseas offices, they will pass the Y2K critical date changes at the local time of the overseas offices and hence the institution may report to the HKMA at different times compared with other systems operated in Hong Kong.

Each institution is expected to assign at least two designated persons of its EMC at any time during these critical periods for communicating with the HKMA's EMC. In view of the large amount and sensitivity of information to be collected by the HKMA, AIs are requested to submit the information to the HKMA through the HKMA's private website system that is being enhanced to capture the information.

Please note that the above reporting requirements and formats may be subject to change in the light of the actual experience of the roll-over to 9 September 1999 and any international best practices in this regard which may be recommended by the Joint Year 2000 Council.

Reporting frequency

In general, AIs that have substantial retail operations are expected to report more frequently in view of the potential impact on the banking system as a result of any disruption they may encounter. The HKMA is aware of the need to keep the reporting burden on AIs to the minimum necessary in view of their busy workload during the critical dates.

In due course, the HKMA will write to each individual institution to set out the exact reporting requirements including the reporting frequency, the reporting channels (including fallback channels) and the relevant contact details. In the meantime, you should prepare for setting up your EMC and the logistical arrangements related to its functions. The operational period of your EMC should cover at least the periods during which the HKMA's EMC will be in operation. Should you have any queries on the above, please contact Mr. Brian Lee at 2878-1651 or Miss Florence To at 2878-1197.

Encl

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

1. Previously referred to as the "Command Centre" in my letter of 14 December 1998. The change in terminology is in line with the latest recommendation of the international financial community including the Global 2000 Co-ordinating Group.

2. The date 9.9.1999 is not expected to cause significant disruption as the problem is less widespread than the century date change. However, it provides a good opportunity for a rehearsal in a real live situation. While it is recognised that it may be a tight time schedule for certain institutions to fully establish their EMCs for the rollover to 9.9.1999, institutions should make use of such opportunity to rehearse the frameworks and other critical aspects (e.g., communication channels) of their EMCs.

3. Apart from monitoring the rollover to 1.1.2000, the EMC should also monitor the institution's performance on 3.1.2000 and 4.1.2000, the first two business days after the millennium change.

4. System activities include the data back-up operations, computer day-end, month-end and year-end operations and report printing. The HKMA understands that some institutions are planning to systemically shutdown their systems before the date change to 1.1.2000 and restart their systems afterwards. For those real-time systems (e.g., phone banking, ATM, credit card) that will be in operation during the Y2K critical date changes, institutions should step up their monitoring of these systems before and after the date changes.

5. The main purpose for requesting AIs to report to the HKMA during the rollover to 9.9.1999 is to provide an opportunity for a rehearsal of the reporting arrangement in a real live situation before the rollover to 1.1.2000.

6. The HKMA understands that some level of exceptions may be expected in normal production circumstances. For instance, operating problems are frequently encountered in end of period processing cycles.