UK to set up 'information clearing house' for disaster recovery

The Bank of England plans to launch a prototype ‘information clearing house’ on disaster recovery for financial firms in the near future, a senior official of the UK’s central bank said.

The move was prompted by lessons learned from the September 11 attacks on New York’s financial district. The prototype will probably be hosted on a website, Bank of England executive director Alastair Clark told a London conference on contingency planning and disaster recovery in the financial services sector.

The central bank, the UK Treasury and the Financial Services Authority - Britain’s chief financial watchdog - have conducted a thorough review of the contingency planning in the UK financial sector in the wake of the New York attacks, Clark said.

He added that communication had probably emerged as the single most important concern, especially between relevant firms, regulators, service providers, central banks and finance ministries.

Communication also raises the question of what information is likely to be useful, Clark said. The answer certainly includes information on: how to get in touch with key people; the immediate financial position of firms, and who has the powers and discretion to get in touch with key people.

Clark also said September 11 had taught the industry that there is a need to consider continuity of staffing as well as continuity of physical systems. One solution for major firms is to switch activities from one financial centre to another, he said.

Another key consideration is the adequacy or otherwise of physical contingency plans. There were some cases after September 11 where back-up sites or systems did not operate as planned, Clark noted.

One of the reasons why financial markets were able to keep going after September 11 was the US Federal Reserve’s policy of providing very large amounts of cash to banks that found their normal payment flows were disrupted, Clark said. But there are concerns about the risks associated with unsecured lending.