Banking and securities regu lators are stepping up efforts to resolve the so-called millennium bug problem. The Hong Kong Monetary Authority yesterday warned banks they might be restricted from further expansion in Hong Kong if they failed to show progress on the issue. The Securities and Futures Commission said it was conducting a survey of stockbrokers and futures and forex traders to gauge their progress. The stock exchange, meanwhile, said it had sent letters to all listed companies urging them to disclose their plans to handle the problem and the likely cost. The monetary authority yesterday said it planned to step up supervision of the sector over the next few months to check on banks' progress. The millennium bug, also known as the Year 2000 problem, arises because most computers are programmed to read only two digits in the date for the year, rather than four. When 2000 arrives, some computers will automatically read it as the year zero. Monetary authority deputy chief executive David Carse said: 'The HKMA will issue formal warning letters to the chief executives of those institutions which exhibit poor performance in their Year 2000 problem projects.' Banks failing to resolve the issue might be restricted from further expansion or from engaging in new activities such as opening new branches, he said. 'The HKMA believes that such institutions should be directing their resources towards correcting deficiencies in their Year 2000 effort rather than diverting resources by engaging in expansionary activities,' Mr Carse said. Last month, Mr Carse expressed concern that banks' efforts to cope with the regional economic crisis might deflect attention from moves to deal with the problem. The warning yesterday from the authority came after a survey showed that some banks were behind schedule in solving the problem. The HKMA survey, conducted at the end of last year, showed that about 10 per cent of banks had fallen behind schedule and only 45 per cent of projects targeting the millennium bug had been completed. The survey found that more than 90 per cent of banks expected to solve the problem by the end of this year, and 90 per cent of projects were progressing on schedule and within budget. 'Although only a limited number of institutions have experienced delays so far, there is still much work to do and the time available is strictly limited,' Mr Carse said. 'The Year 2000 problem is not simply an IT [information technology] problem but an issue of business survival. 'It is therefore crucial that senior management of institutions recognise their responsibility to manage the progress towards compliance.' The authority yesterday announced additional measures for banks to follow, in a bid to urge them to solve the problem on time. All banks' efforts to resolve the problem must be independently verified by the end of this year. The verification includes on-site examination of selected banks by the authority, a review by external auditors and a review by internal auditors from head office. A review by other independent parties, such as IT consultants, will also be required. The regulator will also require the chief executive of each institution to provide a bi-monthly report of their progress with millennium-bug compliance from May. The regulator will co-operate with overseas regulators to monitor the progress of foreign banks with branches in Hong Kong. The authority will discuss with the Financial Services Bureau, other financial regulators and the Hong Kong Association of Banks to arrange for an industry test of cash and payment systems.