Circular
Interagency Paper on Sound Practices to Strengthen the Resilience of the U.S. Financial System
June 20, 2003
Circular No. 11522

To All Depository Institutions and Others Concerned in the Second Federal Reserve District:

A supervisory letter (SR 03-9), dated May 28, 2003, by the Federal Reserve Board, U.S. Securities and Exchange Commission, and Office of the Comptroller of the Currency reported the publication of the Interagency Paper on Sound Practices to Strengthen the Resilience of the U.S. Financial System. This white paper is part of the interagency effort to improve the resilience of the private-sector clearing and settlement infrastructure after September 11, 2001 and ensure the smooth operation of the financial system in the event of a wide-scale disruption.

The sound practices apply most directly to organizations that are deemed to present a type of systemic risk to U.S. financial markets should they not be able to complete open transactions. Nevertheless, all banking organizations and other financial market participants are encouraged to review and consider implementation of the sound practices, particularly if a firm's transaction levels approach those deemed to be significant.

The paper describes four sound practices that pertain to appropriate back-up capacity for operations sites and data centers for the recovery and resumption of clearance and settlement activities in critical (wholesale) financial markets. The critical financial markets are defined as the markets for federal funds, foreign exchange, commercial paper, corporate equities and bonds, and government, agency and mortgage-backed securities.

The interagency paper is attached.

Questions on this matter may be directed at this Bank to Todd Waszkelewicz, Examining Officer, Risk Management or Christopher J. McCurdy, Senior Vice President.