The FSA is to lead a six-week exercise to test the resilience of financial institutions in the event of an avian flu pandemic starting on October 13.
In a speech to the Lord Mayor and assembled guests at Mansion House in London, FSA chairman Callum McCarthy said 60 organisations will be responding to a scenario that simulates a pandemic flu outbreak and the potential impact on the UK financial sector.
McCarthy says: “There is a need for much fuller thought about how financial services would be affected: the availability of key staff, services and systems; the effect on liquidity; the effect on markets; the changes needed to internal processes if, as seems likely, a severe health threat resulted in widespread voluntary absenteeism.”
The FSA chairman cited Sars as an example of how financial services could be affected. He said that more than 150,000 people die every day compared with the Sars epidemic which infected 8,000 people and killed 800. But despite the relatively small mortality statistics of Sars, McCarthy says the epidemic had a major impact on the global economy.
He says: “East Asian GDP was reduced by an estimated 2 per cent, with the tourism and retail sectors being particularly badly affected. During the first month of the outbreak, Hong Kong equity prices fell by 12 per cent vis-à-vis global stock prices. An avian flu pandemic, were one to occur, is forecast to have immediate health effects far greater and far more long lasting than Sars.”
Government departments, health agencies, service providers and foreign regulators are working with the FSA on design and response throughout the exercise.
McCarthy adds: “It is an area we would neglect at our peril, and we are determined not to allow this to happen.”