Why you have the right to know if your bank's beaten the bug

This week, Action 2000 and the Audit Commission indulged in the first round of Y2K 'naming and shaming'. Six district councils and three NHS bodies were rapped for falling into the "red" zone - that is, being seriously behind in their millennium preparations.

But not everyone is getting in on the act. Michael Foot, the managing director of the Financial Services Authority (FSA), steadfastly refused to 'out' any financial institutions, although eight of the top 450 financial institutions are running a "serious risk of material disruption". A further 32 per cent are behind in their preparations, but are expected to catch up in time (an "amber" classification in Action 2000's parlance).

Foot insists that his first priority is protecting depositors, investors, and policyholders, and he feels that naming and shaming will undermine their position.

Of course, the difficulty with outing organisations that are behind in their preparations, even "dangerously" behind, is that no one knows what the consequences of Y2K will be. It's possible that the effects will be minor and manageable. It's also possible that the entire organisation will go under.

With this uncertainty in mind, Foot has sympathy with the finance industry - but who wants to take that kind of chance with their bank? In banking, perhaps above all other industries, public confidence is paramount.

For the vast majority, naming and shaming will leave us breathing a collective sigh of relief, because most financial institutions have made extensive preparations. And the minority of businesses holding accounts with organisations that are falling behind will be able to take action.

Businesses need to have all the available information for their contingency plans, particularly if that means they need to do something as time consuming as switching banks. How late does the FSA plan to leave it?

One financial institution going down will not pull the whole of the banking industry under with it, not if the public has confidence that the others are sound. A clear migration path should also be set out before making the announcement. Lloyds of London, Barings, and BCCI all bear witness to the fact that businesses, and the general public, accept bank failures as isolated incidents. But Michael Foot is convinced that a run on the banks is the inevitable result of naming and shaming on Y2K.

Robin Guenier, chief executive of Taskforce 2000, has pointed out that at some point in the near future, the difference between an "amber" and a "red" classification disappears. If major financial institutions are seriously behind now, then they may well have experienced problems already, and the odds of pulling themselves into any sort of compliance ahead of the new year are evaporating quickly.

Eight financial institutions in Britain are failing their depositors and investors by preparing inadequately for the millennium bug. The FSA has a duty to warn those investors, and to let them make up their own minds about the risk.