viewed as necessary by the agencies and the financial industry to ensure the rapid recovery of the u. s. financial system following a wide - scale disruption that may include loss or inaccessibility of staff. in particular, the paper articulates sound practices for resumption and recovery of critical clearing and settlement activities by core clearing and settlement organizations and financial institutions that play significant roles in critical markets by virtue of their market share ( greater than five percent in one or more critical financial markets ). the sound practices include establishing geographically dispersed backup facilities for clearing and settlement so that these organizations can meet recovery objectives within the business day if a wide - scale disruption takes place. using their respective supervisory and regulatory processes, the agencies are conducting focused, ongoing dialogues with the organizations that are subject to the sound practices paper. financial organizations are investing millions of dollars to implement the sound practices. clearing and settlement organizations, which are the financial utilities for the u. s. financial system, have made substantial progress in improving their resilience and achieving out - of - region geographic dispersion between primary and backup operations facilities and data centers. several have met or will meet the sound practices by year - end, with the remainder scheduled to complete implementation in the second half of 2005. banks and broker - dealers that play significant roles in the critical markets defined in the paper indicate they will meet the paper ’ s 2006 implementation date. the sound practices are also relevant to other financial - sector participants. many of the concepts in the paper amplify long - standing and well - recognized principles relating to safeguarding information and the ability to recover and resume essential financial services. over the past few years, the ffiec has revised and expanded guidance for banking organizations pertaining to operational risk. in december 2002, we issued revised guidance on information security. in april 2003, the ffiec issued expanded guidance on business - continuity planning. the guidance addresses both the operationaland business - risk issues that depository institutions must incorporate into their business - continuity plans. the guidance specifically refers to the need to plan and test for recovery of critical business lines and functions - such as retail banking services - in the face of wide - scale disruption, as well as scenarios in which physical or information assets and personnel are lost. recently, the ffiec issued guidance on managing additional risks arising from information technology operations, network management, and wholesale and retail payments systems. our examiners are assessing banks against these guidelines. other financial market authorities are taking similar steps for the organizations

system was functioning normally. borrowing by depository institutions surged to a record $ 45. 5 billion by wednesday. federal reserve discount loans to banks to meet liquidity needs dropped off sharply on thursday and returned to lower levels by friday. separately, overnight overdrafts on tuesday and wednesday rose to several billion dollars, as a handful of depository and other institutions with accounts at the federal reserve were forced into overdraft positions on their reserve accounts. overdrafts returned to negligible levels by the end of the week. like their u. s. counterparts, foreign financial institutions operating in the united states faced elevated dollar liquidity needs. in some cases, however, these institutions encountered difficulties positioning the collateral at their u. s. branches to secure federal reserve discount window credit. to be in a position to help meet the enhanced need for funds, three foreign central banks established new or expanded arrangements with the federal reserve to receive u. s. dollars in exchange for their respective currencies. these swap lines, which lasted for thirty days, consisted of $ 50 billion for the european central bank, $ 30 billion for the bank of england, and an increase of $ 8 billion ( from $ 2 billion to $ 10 billion ) for the bank of canada. the european central bank drew on its line that week to channel funds to institutions with a need for dollars. during that week, the disruption in air traffic caused the federal reserve to extend record levels of credit to depository institutions in the form of check float. float increased dramatically because the federal reserve continued to credit the accounts of banks for the checks they deposited, even though the grounding of airplanes meant that checks normally shipped by air could not be presented to the checkwriters ’ banks on the usual schedule. float declined to normal levels the following week once air traffic was permitted to recommence. finally, over the course of the week, as the market for reserves began to function more normally, the federal reserve resumed the use of open market operations to provide the bulk of reserves. the open market desk accommodated all propositions for funding through repurchase agreements down to the target federal funds rate, operating exclusively through overnight transactions for several days. the injection of reserves through open market operations peaked at $ 81 billion on friday. the combined infusion of liquidity from the various sources caused the level of reserve balances at federal reserve banks to rise to more than $ 100 billion on wednesday, september 12 - about ten times the normal