Taskforce looks at disaster law

A top-level taskforce is to investigate the need for new laws to protect the UK financial system in the case of a major operational disaster - including technology problems caused by bugs or viruses.

The Treasury-sponsored group, chaired by Sir Andrew Large, deputy governor of the Bank of England, will examine how any new legislation under the Civil Contingencies Bill might restore order in the face of chaos hitting the banking system.

It will consider suspension and direction powers, allowing the government to temporarily suspend financial obligations and to open or close UK markets.

The group will also consider whether businesses need to strengthen contingency provisions in contracts such as the use of standard clauses and improve market co-operation.

Sir Andrew said: 'Much has already been achieved in addressing business continuity issues in the financial services sector and we will need to consider carefully whether further powers are warranted and what else could be done.'

A Green Paper, The Financial System and Major Operational Disruption, published in February looked at introducing statutory powers but its results were inconclusive.

'The green paper floated the idea of legislation and there were a broad range of industry responses. The key theme was that the issue needed more detailed study,' said a Treasury spokesman.

But a spokeswoman for the Association for Payment Clearing Services which contributed to the Green Paper, said that any intervention by the government should only be 'in extreme circumstances with full involvement of the payment systems.'

She added: 'There would have to be special attention to the telecommunications infrastructure because that's what payment systems depend on.'

A Financial Services Authority spokesman said that the taskforce findings should not have much impact on IT contracts: 'From a regulation point of view, financial services IT systems should have robust back-up in place already and they should not be affected by legislation.'

The 10-15 Taskforce representatives will be announced soon and its interim report is expected in November with the final report due next February.