Financial services:

Michael Foot said he was pleased to be able to report an improved position, especially for High Impact Groups - those where problems could have a big effect on retail customers or the markets.

Michael Foot said:

"A number of these Groups previously classified as Red under the FSAs Traffic Light assessment - i.e. serious risk of material disruption - have been able to provide hard evidence in recent weeks to justify us upgrading our overall view of them. The material I provided in mid-March was based substantially on end-1998 information. Our reassessments reflect both solid progress by the groups since the beginning of this year and fresher information available to us from them. As a result I am pleased to say that the number of High Impact Reds has fallen from 12 to 2, and there has also been an increase in the number of groups assessed as being on track.

"For High Impact groups we now see that 63% are on track for compliance, 36% are behind but likely to get on track (Amber) and 1% - the two groups are at serious risk (Red). This compares with our assessment in mid-March for High Impact groups of 58% on track, 35% Amber and 7% Red 12 groups. So the percentage behind or at serious risk has dropped from 42% to 37%.

"For Medium Impact groups, we now see that 51% are on track, 39% Amber and 10% Red. In mid-March the overall position for Medium Impact groups was 40% on track, 45% Amber and 15% Red. So the percentage behind or at serious risk has dropped from 60% to below 50%."

Michael Foot said:

"Our main concern is to continue to work constructively towards full compliance by the sector in the best interests of depositors, investors and policy holders. Every High and Medium Impact group that was at Red was told of our judgement and challenged to prove us wrong or rapidly produce a convincing way out. It is encouraging that we have since been able to upgrade our view of a number of them. Intensive and constructive dialogue continues. We will give further progress reports as new material becomes available and I hope and expect that the overall position will continue to improve."

"The FSA and the Bank of England are also increasing rapidly the resources being devoted to talking to firms and trade associations about what might be termed precautionary or unusual behaviour over the rest of 1999. One or two aspects such as the modest spike in forward money market rates over the year-end that has appeared in all the major currency markets have already received public attention.

But we know that there is a much wider area to be covered. We need to hear what firms and other key participants are planning and to ensure that the planning is based on as much sound information as can be provided by all involved. We shall be taking steps to do just that."

Notes for editors

The Financial Services Authority''s responsibilities include maintaining confidence in the UK financial system and the protection of customers. The primary responsibility for achieving Year 2000 compliance and adequate business continuity rests with financial institutions themselves. Year 2000 is a regulatory issue because of its impact on depositor, investor and policy holder protection; on prudential soundness of financial institutions; and market integrity. Promoting Year 2000 preparedness is a major FSA supervisory priority.