Association, SIA to Comment on Strategies to Ensure Strength and Resiliency of Financial Markets in Wake of Future Disruptions

The Association, along with the Securities Industry Association, is preparing a comment letter in response to a jointly issued agency white paper on the implementation of sound business practices to strengthen the resilience of the nation’s financial system.

    In late August, the Federal Reserve Board, the Office of the Comptroller of the Currency, the Securities and Exchange Commission and the New York State Banking Department released a draft white paper entitled White Paper on Sound Practices to Strengthen the Resilience of the U.S. Financial System.

    The agencies’ paper identifies—and discusses their views of—sound practices they believe are necessary to strengthen the resilience of critical U.S. financial markets in the face of a wide-scale regional disaster. The preliminary conclusions are based on interviews with industry participants and market utilities about actions being taken to strengthen their ability to recover and resume critical business activities in the wake of future wide-scale regional disruptions such as the events of September 11, 2001. The agencies identified broad consensus on three business-continuity objectives that have assumed special importance after September 11. These are: the rapid recovery and timely resumption of critical operations following a wide-scale regional disruption; the rapid recovery and timely resumption of critical operations following the loss or inaccessibility of staff in at least one major operating location; and a high level of confidence, through ongoing use or robust testing, that critical internal and external continuity arrangements are effective and compatible.

    The sound practices identified apply most directly to “core clearing and settlement organizations” and “financial institutions that play significant roles in critical markets.” Critical markets are defined as the markets for federal funds, foreign exchange, commercial paper, and government, corporate and mortgage-backed securities. In the Association’s view, the white paper proposes some potentially burdensome guidelines regarding the location and staffing of backup facilities. In its comment letter, the Association plans to clarify distinctions between firms that play significant roles and those that do not, so that the two types of firms can develop appropriate plans. The Association will also attempt to determine what type of business disruption is of most concern to the agencies. The Association’s Operations Council and its Business Continuity Management Council, formed to help coordinate Association activities to minimize the impact of market disruptions, are assisting in the preparation of the comment letter.

    Comments on the white paper are due by October 21. After reviewing the comments, the agencies plan to issue a final version of the paper. A copy of the white paper is available on the SEC’s Web site. The comment letter will be available on the Association’s Web site.

    For more information, contact Rob Fry, Director of Fixed-Income Operations, at 212.440.9473, or Eric Foster, Vice President and Assistant General Counsel, at 212.440.9406.

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