fourth, supervisory expectations for business continuity planning and disaster recovery are longstanding. in general, the supervisory process focuses on a bank's risk - management and governance process, rather than mandating specific technical or operational standards. as institutions have expanded their use of integrated systems to support business operations, the potential for single points of failure has increased. in response, the banking supervisors have issued more detailed guidance on contingency planning, including managing information technology risk, information security, outsourcing, and network management. examiners regularly assess the adequacy of business continuity plans. moreover, the integration of information technology reviews into safety and soundness examinations and our evolving and expanding definition of the elements of operations risk are resulting in a more comprehensive approach to assessing the completeness and adequacy of business resumption plans. lessons learned from 9 / 11 even when performing well in a crisis, one always has lessons to learn and to incorporate into one's planning. if we are to strengthen the overall resilience of the financial system, institutions will need to develop internal business - resumption standards and define their recovery targets in a fairly consistent manner. decisions made by an individual institution may affect not only its own safety and soundness but also the safety and soundness of other institutions and, indeed, the very functioning of the financial markets. as a result, we believe that coordinated discussions about sound practices for business continuity involving industry participants and regulators are an important part of our response to the events of 9 / 11. the federal reserve, along with several other financial regulators, met with a number of the larger financial firms in february to discuss how 9 / 11 has affected their thoughts about business - resumption planning. our discussion group agreed that the focus of business continuity plans should be the smooth functioning of the financial system, particularly for firms that perform core functions in the wholesale and retail markets. moreover, the group recognized, more keenly than before 9 / 11, the inter - dependence of financial system participants, wherever located. the group also agreed that planning assumptions about the scope and duration of operational disruptions need to be broadened. the group came to several other conclusions that i would like to highlight : • business resumption plans need to be expanded to provide for wide - scale and regional events. they also should take into account the loss or inaccessibility of staff. • obvious vulnerabilities are associated with the current geographic concentration of market participants and some of their

81 billion into the government securities markets. we also loaned approximately $ 46 billion from the discount window - typical levels are around $ 100 million. and, to address the collateral needs of foreign financial institutions doing business in the united states and to meet the demand for dollars abroad, we executed a series of agreements to do currency swaps, if needed, with the european central bank, the bank of england, and the bank of canada totaling $ 90 billion. the market reacted positively to the statements that we issued inviting banks to discuss with their regulators temporary balance - sheet issues arising from the market disruptions and encouraging banks to work with customers affected by 9 / 11. the agencies also are busy at all levels updating emergency communication protocols and reviewing and improving strategies for communicating with financial institutions directly and with the public in times of crisis, when effective communication is particularly necessary. as we saw during 9 / 11, that being prepared and able to provide accurate and timely information to the public is critical to maintaining public confidence in the financial system. supervisors, in encouraging banks and other market participants to strengthen business - resumption plans, still have much to learn from financial institutions and experts in business - continuity planning. we have much less experience in modeling and predicting these operational risks than we have for understanding credit or market risk, and some threats may be too idiosyncratic to be modeled at all. nevertheless, we are continuing our efforts to learn how financial institutions are applying the lessons they learned during 9 / 11 to their own business - resumption plans and are encouraging awareness and participation by senior management. our supervisory plans for the rest of the year and for 2003 are being revised to emphasize business resumption, particularly for large banking organizations. we are talking to institutions about the robustness of their contingency plans and encouraging them to ensure that the planning process includes participation from all relevant areas of their organization and includes expanded scenarios that take into account the effects that might flow from sudden, external events. but, we are stopping short of imposing detailed regulatory standards. as best practices emerge to address the new paradigm, we may find it appropriate to expand supervisory guidance so as to obtain the appropriate level of overall resilience for the financial system. i expect we will come to some conclusion about the need for additional guidance over the next few months. however, i feel strongly that any such guidance should resist taking an overly prescriptive approach. business resumption planning is not a " one size fits all " task.