The Bank of Yokohama, Ltd. - Year 2000 Compliance

Today, companies across every industry use computer systems for various purposes. Some of the computer programs in use were made to recognize only the last two digits of a calendar year. The Year 1998 and 1999 are recognized as 98 and 99 respectively. As a result, such programs recognize the Year 2000 as 00 and can not make the distinction between the years 1900 and 2000. This inability of the programs may cause erroneous processing, such as ‘Processing can not be executed as intended’ and ‘Data outside the effective time period are erased.’

The Y2K Problem poses a serious challenge to the banking industry as failure to address this issue may disrupt day-to-day banking operations such as settlements and interest computation. Moreover, banks may also be affected both directly and indirectly by the non-compliance with Y2K issues of their clients and of their clients’ business counterparties.

The Bank of Yokohama, Ltd.（the “Bank”）has made meeting the Year 2000 challenge, not just a system matter, but a high corporate priority. The Bank incorporated the Y2K compliance into the Medium-Term Business Plan called “Innovation 21” and has been coordinating the efforts with its affiliates and subsidiaries.

The Bank has established “Year 2000 Compliance Board Committee,” consisting of all senior executives of the board of directors. Under Year 2000 Compliance Board Committee, the Bank has established “Year 2000 Compliance Executive Committee,” chairman and vice chairman of which are the Managing Director of IT Division and the Managing Director of General Planning Department, respectively and the members of which are the General Managers of the departments closely related to Y2K. Year 2000 Compliance Executive Committee also has full-time staffs.

The members of Year 2000 Compliance Board Committee meet at least once every month to make decisions on important issues and to monitor the progress of the Bank’s Y2K compliance efforts. The decisions made by Year 2000 Compliance Board Committee are reported to the board of directors every month.

Computer Systems

The Bank has identified all the systems affected, including the systems of its affiliates and subsidiaries, and assessed the effects of the possible failure of each system on the Bank’s operation. The systems surveyed include core systems, small business computers, PC systems, equipment with microcomputers, elevator controlling systems, and security systems. After completing the assessment, the Bank prioritized the systems affected in order of importance, and started renovating and testing the systems. The Bank has contacted all vendors of externally developed systems to request confirmation of the Y2K compliance of such systems.

As of the end of March 1999, assessment, renovation, and internal validation, were completed for the internally（or by subsidiaries）developed core systems that directly deal with deposits, loans, and remittances for customers. In addition, with regard to externally developed core systems, the Bank has obtained Y2K compliance confirmation from all vendors. Furthermore, as of the end of June 1999, the Bank completed all Y2K measures, including the testing of external connections, for the above mentioned core systems and other important systems.

With regard to other systems, the Bank is also in process of assessment, renovation, and internal validation for the internally（or by subsidiaries）developed systems, and the Bank is obtaining Y2K compliance confirmation from vendors of externally developed systems. As a consequence, the Bank plans to complete all Y2K measures for all systems by the end of August 1999.

With regard to the programs of on-line accounting system, the Bank took steps to make them Year 2000 compliant at the time of switching over to the Third Generation On-line Systems that have been operating since 1989.

Other Facilities

The Bank has surveyed all vendors of externally developed and produced facilities such as vaults, elevators, telephone switching equipment, security doors and air conditioning equipment about the Y2K compliance of such facilities. As of the end of June 1999, the Bank obtained Y2K compliance confirmation from the majority of vendors of such facilities. The Bank continues to contact the vendors of remaining facilities and request prompt remedial action from such vendors where required. All remedial measures for such facilities are to be completed by the end of August 1999.

Connection Tests with Users of Electronic Banking Services

The Bank is continuing its efforts to conduct connection tests with users of Electronic Banking Services. As of the end of June 1999, the tests with most customers transferring large volume of data were completed. The Bank plans to carry out the tests with other customers as required.

Risk Control

The Bank has assessed the potential effect of Y2K related risks, including credit risk, legal risk, and operation risk. The Bank is striving to manage and mitigate these risks.

Customers’ Y2K Preparedness

The Bank can not resolve Y2K problem just by making its computer systems Y2K compliant. The Bank and its customers may be affected if systems of infrastructure, such as power supply, telecommunications, and transportation or systems of the customers should fail. The Bank has been informing its customers of potential Y2K Problem of their computer systems. For example, the Bank has provided its customers with leaflets titled “Y2K Problem” and has sent questionnaires on the Y2K Problem to customers with electronic banking service and corporate customers with loan products（40,000 questionnaires and 4,000 questionnaires were sent in October 1998 and in March 1999 respectively）.

Contingency Planning

The Bank has a disaster recovery plan for large-scale earthquakes and other disasters. Considering the unique nature of the Y2K Problem, the Bank established contingency plans by the end of June 1999 to ensure readiness for potential Y2K Problem. Trials of the contingency plans will be made toward the end of 1999 and the plans are to be refined from time to time reflecting the results of trials.

The total expense to achieve Y2K compliance is estimated at approximately 9 billion yen. This estimate includes 2.3 billion yen for projects initiated exclusively for mitigating the Y2K issue, including manpower costs and expense for renovating, upgrading, replacing, and testing systems. As of the end of June 1999, 0.9 billion yen of the 2.3 billion yen have been spent and 1.4 billion yen will be spent during fiscal 1999. The 9 billion yen estimate also includes the amount of 6.7 billion yen already spent for projects where Y2K issues were being addressed in conjunction with system upgrades or replacements.

The purpose of this home page is to disclose material facts concerning the status of Year 2000 readiness of the Bank of Yokohama, Ltd. This home page shall not be construed to constitute any representation or warranty, either explicit or implied, by the Bank of Yokohama, Ltd. In no event shall the Bank of Yokohama, Ltd. assume any obligations or waive any rights whatsoever by virtue of this disclosure.