Borrower 1 was issued an account number that had already been assigned to Borrower 2 last year. This was discovered and we were able to reassign Borrower 1 with a new number. However, does anything need to be done for Borrower 2?

I would look for any transactions that borrower 1 may have made and borrower 2 might have seen, and vice versa. (Privacy issue) Also, if interest was given, a potential adjustment to a 1099 (if a deposit account).

This was caught prior to Borrower 1's loan closing. You don't think we need to go so far as to close Borrower 2's account and reopen it under another number?

I think it depends on what the Bank is comfortable with and maybe what the customer wants. My next question is what is the Bank doing to ensure this does not occur in the future?

I usually see this occurring during an acquisition and/or merger.

OK, the duplicate account number never really hit the books (caught prior to closing). As osucpa said, look at how it happened and create controls to prevent it.