Taskforce to look at legislation to protect UK banking system

A government taskforce will look at possible legislation to protect banking systems and procedures in the event of a terrorist attack or major computer outage.

The Treasury opened a green paper, 'The financial system and major operational disruption' for public consultation earlier this year.

It warned that disruption to payment and settlement computer systems such as Chaps and Bacs could lead to chaos in the banking system.

In one scenario presented in the paper, a virus attack that hit banks at the end of the month would prevent businesses being able to pay staff wages.

The paper proposes that in a situation like this the government could force banks to stop direct debits and other payments going out of retail customers accounts until they were able to receive their salaries.

The consultation period has now finished and Sir Andrew Large, deputy governor of the Bank of England, has been drafted in to establish a taskforce to examine the need for such emergency legislative powers.

Large said in a statement: "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."

An interim report is expected in November this year and the taskforce will make its final recommendations by February 2004.

Separately the government also published its draft Civil Contingencies Bill today, which includes proposals to protect electronic and communications networks in the event of natural disasters or terrorist attacks.

The government will talk with the internet industry to devise ways of protecting organisations and companies designated as critical to the national infrastructure.