The Financial Services Authority says most financial groups are Millennium compliant.
FSA financial supervision managing director Michael Foot says: "For high impact groups, where problems could have a big effect on retail customers or the markets, our assessment shows around 58 per cent are on track for Year 2000 compliance.
"Thirty-five per cent are behind but likely to get on track and less than 8 per cent pose a serious risk."
Foot was providing a detailed analysis of the 'Traffic Light' assessment, the FSA's Y2K research project.
He continued: "For medium impact groups, the overall position is that 40 per cent are on track,.45 per cent behind and 15 per cent pose a serious risk."
Foot also stressed that he was talking about the FSA's assessment at the end of 1998 and hoped that the situation will have improved further when March's snapshot is taken into account.