Financial Market Preparedness: Significant Progress Has Been Made, but Pandemic Planning and Other Challenges Remain
GAO-07-399
Published: Mar 29, 2007. Publicly Released: Apr 30, 2007.
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Highlights
This is GAO's third report since the September 11 terrorist attacks that assesses progress that market participants and regulators have made to ensure the security and resiliency of our securities markets. This report examined (1) actions taken to improve the markets' capabilities to prevent and recover from attacks; (2) actions taken to improve disaster response and increase telecommunications resiliency; and (3) financial regulators' efforts to ensure market resiliency. GAO inspected physical and electronic security measures and business continuity capabilities using regulatory, government, and industry-established criteria and discussed improvement efforts with broker dealers, banks, regulators, telecommunications carriers, and trade associations.
Recommendations
Recommendations for Executive Action
| Agency Affected | Recommendation | Status |
|---|---|---|
| Office of the Comptroller of the Currency | To increase the likelihood that the securities markets will be able to function during a pandemic, the Chairman, Federal Reserve, the Comptroller of the Currency, and the Chairman, SEC, should consider taking additional actions to ensure that market participants adequately prepare for an outbreak, including issuing formal expectations that business continuity plans for a pandemic should include measures likely to be effective even during severe outbreaks, and setting a date by which market participants should have such plans. |
In December 2007, OCC, in conjunction with the Federal Financial Institutions Examination Council, issued an Interagency Statement on Pandemic Planning to the national banks. The statement directed those banks to ensure the pandemic plans they have in place are adequate to maintain critical operations during a severe outbreak. Specifically, the institution's business continuity plan (BCP) address pandemics and provide for a preventive program, a documented strategy scaled to the stages of a pandemic outbreak, a comprehensive framework to ensure the continuance of critical operations, a testing program and an oversight program to ensure that the plan is reviewed and updated. According to the OCC liaison, these plans were to be in place by the end of 2007, and in late 2007 OCC staff had begun reviewing banks compliance with this compliance. By December 31, 2007, their staff had reviewed the plans of the key banks that participant in the securities markets and confirmed that these organizations' plans addressed the items required by the guidance.
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| Federal Reserve System | To increase the likelihood that the securities markets will be able to function during a pandemic, the Chairman, Federal Reserve, the Comptroller of the Currency, and the Chairman, SEC, should consider taking additional actions to ensure that market participants adequately prepare for an outbreak, including issuing formal expectations that business continuity plans for a pandemic should include measures likely to be effective even during severe outbreaks, and setting a date by which market participants should have such plans. |
In December 2007, the Federal Reserve, in conjunction with the Federal Financial Institutions Examination Council, issued an Interagency Statement on Pandemic Planning to each Federal Reserve Bank and to all banking organizations supervised by the Federal Reserve. These plans were to be in place by the end of 2007. The statement directed those banks to ensure the pandemic plans they have in place are adequate to maintain critical operations during a severe outbreak. Specifically, the institution's business continuity plan (BCP) address pandemics and provide for a preventive program, a documented strategy scaled to the stages of a pandemic outbreak, a comprehensive framework to ensure the continuance of critical operations, a testing program and an oversight program to ensure that the plan is reviewed and updated. According to Federal Reserve officials, examiners began incorporating the new guidance, including the expectation that plans be in place, into exams occuring after December 2007.
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| United States Securities and Exchange Commission | To increase the likelihood that the securities markets will be able to function during a pandemic, the Chairman, Federal Reserve, the Comptroller of the Currency, and the Chairman, SEC, should consider taking additional actions to ensure that market participants adequately prepare for an outbreak, including issuing formal expectations that business continuity plans for a pandemic should include measures likely to be effective even during severe outbreaks, and setting a date by which market participants should have such plans. |
In July and August of 2007, SEC's Market Regulation Division issued letters to the major clearing organizations and exchanges-those covered by the Commission's 2003 Policy Statement on Business Continuity Planning for Trading Markets-that directed these organizations to confirm by year-end 2007 that their pandemic plans are adequate to maintain critical operations during a severe outbreak. Specifically, the institution's business continuity plan (BCP) address pandemics and provide for a preventive program, a documented strategy scaled to the stages of a pandemic outbreak, a comprehensive framework to ensure the continuance of critical operations, a testing program and an oversight program to ensure that the plan is reviewed and updated.
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Banking regulationEmergency preparednessFacility securityFinancial institutionsHomeland securityInformation securityPandemicPhysical securityRisk managementSecurities regulationStock exchangesStocks (securities)TelecommunicationsTerrorism