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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) - January 29, 1999
MELLON BANK CORPORATION
(Exact name of registrant as specified in charter)
Pennsylvania 1-7410 25-1233834
(State or other jurisdiction (Commission (I.R.S. Employer
of incorporation) File Number) Identification No.)
One Mellon Bank Center
500 Grant Street
Pittsburgh, Pennsylvania 15258
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code - (412) 234-5000
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ITEM 5. OTHER EVENTS
The following describes Mellon Bank Corporation's progress with respect to its
year 2000 project and the milestones that have been achieved since the filing of
its Quarterly Report on Form 10-Q for the quarter ended September 30, 1998.
Year 2000 Project
In early 1996, Mellon Bank Corporation (the "Corporation") formed a year 2000
project team to identify information technology and non-information technology
systems that require modification for the year 2000. A project plan has been
developed with goals and target dates. The Corporation's year 2000 project plan
includes inventory, assessment, remediation, system testing, enterprise testing,
contingency planning and internal certification. The Corporation's business
areas are in various stages of this project plan. The Corporation has completed
approximately 90% of the remediation and system testing for internal mission
critical information technology systems. In late 1998, the Corporation began
significant enterprise testing (i.e., testing with customers, integration
testing between systems and testing with third-party vendors) of mission
critical information technology systems, which testing is expected to be
completed by June 30, 1999. The Corporation currently expects to have completed
remediation and planned testing of mission critical non-information technology
systems by June 30, 1999. The Corporation also currently expects to have
substantially completed remediation and planned testing of both information
technology and non-information technology systems that the Corporation has
determined are of high business value and priority (although not mission
critical) by June 30, 1999.
The Corporation incurred expenses throughout 1996, 1997 and 1998 related to this
project and will continue to incur expenses in 1999. The Corporation currently
estimates that the costs related to inventory, assessment, remediation, system
testing, enterprise testing, contingency planning and internal certification
will be approximately $95 million. Approximately 15% of these costs were
incurred in 1996 and 1997, approximately 45% were incurred in 1998 and
approximately 40% are expected to be incurred in 1999. Expenditures in 1999 are
expected to relate primarily to enterprise testing, contingency planning and
internal certification. A significant portion of total year 2000 project
expenses is represented by existing staff that has been redeployed to this
project. The Corporation does not believe that the redeployment of existing
staff will have a material adverse effect on its business, results of operations
or financial position. Incremental expenses related to the year 2000 project
are not expected to materially impact operating results in any one period.
The impact of year 2000 issues on the Corporation will depend not only on
corrective actions that the Corporation takes, but also on the way in which year
2000 issues are addressed by governmental agencies, businesses and other third
parties that provide services or data to, or receive services or data from, the
Corporation, or whose financial condition or operational capability is important
to the Corporation. To reduce this exposure, the Corporation has identified,
and has an on-going process of contacting, mission critical third-party vendors
and other significant third parties to determine their
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year 2000 plans and target dates. Risks associated with third parties located
outside the United States may be higher insofar as it is generally believed that
non-U.S. businesses may not be addressing their year 2000 issues on as timely a
basis as U.S. businesses. Notwithstanding the Corporation's efforts, there can
be no assurance that mission critical third-party vendors or other significant
third parties will adequately address their year 2000 issues.
The Corporation is developing contingency plans to address risks associated with
year 2000 issues. These activities include remediation contingency plans, year
2000 business resumption contingency plans, and event management plans.
Remediation contingency plans address the actions that may be taken if the
current approach to remediating a mission critical technology system is falling
behind schedule or may not be completed when required. Such plans principally
involve internal remediation or identifying alternate vendors. The Corporation
has substantially implemented its remediation contingency plans. Year 2000
business resumption contingency plans address year 2000 problems that occur,
notwithstanding the remediation efforts of the Corporation and third parties.
As a part of its year 2000 business resumption contingency planning, the
Corporation is enhancing its existing business resumption plans to reflect year
2000 issues and is developing plans designed to coordinate the efforts of its
personnel and resources in addressing any mission critical year 2000 problems
that become evident. In this regard, all existing business resumption plans
involving mission critical processes have been reviewed, and options for
addressing potential year 2000 problems have been identified. The Corporation
expects to continue reviewing, enhancing and validating such plans through
mid-1999. Event planning is intended to address year 2000 risks by actively
monitoring operations during the period of time around the turn of the century
with a view to identifying any year 2000 problems that occur and taking action
to manage and resolve such problems. These actions may include implementing
previously developed business resumption contingency plans. Event planning is in
progress and will continue throughout 1999 and the first quarter of 2000. There
can be no assurance that any contingency plans will fully mitigate any year 2000
failures, problems or disruptions. Furthermore, there may be certain mission
critical third parties, such as utilities, communication companies,
transportation companies or governmental entities, where alternative
arrangements or sources are unavailable or severely limited.
The Corporation's credit risk associated with borrowers may increase to the
extent borrowers fail to adequately address year 2000 issues. As a result,
there may be increases in the Corporation's problem loans and credit losses in
future years. In addition, the Corporation may be subject to increased risks as
a fiduciary to the extent that issuers of assets it manages or administers fail
to adequately address year 2000 issues and to increased liquidity risks to the
extent of deposit withdrawals or to the extent its lenders are unable to provide
the Corporation with funds due to year 2000 problems. It is not, however,
possible to quantify the potential impact of any such risks or losses at this
time.
Until the year 2000 event actually occurs and for a period of time thereafter,
there can be no assurance that there will be no problems related to year 2000.
The year 2000 technology challenge is an unprecedented event. If year 2000
issues are not adequately
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addressed by the Corporation and third parties, the Corporation could face,
among other things, business disruptions, operational problems, financial
losses, legal liability and similar risks, and the Corporation's business,
results of operations and financial position could be materially adversely
affected.
The foregoing year 2000 discussion contains "forward-looking statements" within
the meaning of the Private Securities Litigation Reform Act of 1995. Such
statements, including, without limitation, anticipated costs, the dates by which
the Corporation expects to complete remediation and testing of systems and
contingency planning, and the impact of the redeployment of existing staff, are
based on management's best current estimates, which were derived utilizing
numerous assumptions about future events, including the continued availability
of certain resources, representations received from third-party vendors and
other factors. However, there can be no guarantee that these estimates will be
achieved, and actual results could differ materially from those anticipated.
Specific factors that might cause such material differences include, but are not
limited to: the availability and cost of personnel trained in this area; the
ability to identify and convert all relevant systems; results of year 2000
testing; adequate resolution of year 2000 issues by governmental agencies,
businesses or other third parties that are service providers, suppliers,
borrowers or customers of the Corporation; unanticipated system costs; the need
to replace hardware; the adequacy of and ability to implement contingency plans;
and similar uncertainties. The forward-looking statements made in the foregoing
year 2000 discussion speak only as of the date on which such statements are
made, and the Corporation undertakes no obligation to update any forward-looking
statement to reflect events or circumstances after the date on which such
statement is made or to reflect the occurrence of unanticipated events.
The foregoing year 2000 discussion constitutes a Year 2000 Readiness Disclosure
within the meaning of the Year 2000 Readiness and Disclosure Act of 1998.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
MELLON BANK CORPORATION
Date: January 29, 1999 By: /s/ Steven G. Elliott
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Steven G. Elliott
Senior Vice Chairman and Chief
Financial Officer
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