Answer by Andy Zavoina:
I have never heard that this was a requirement and it could depend on the topography of your area. The idea is to base your backup facility a sufficient distance away so that it would likely not be effected by any natural disaster that disabled your main facility.
The backup needs to be able to service your needs to an extent desired and it depends on the services it will provide. Is this just data processing, or does it include paying and receiving tellers? If the latter, how far do you want your customers to travel?
Many DR plans include facilities with satellite communications and generators that will be delivered to a site of your choosing within 24 hours. This could eliminate the need for any mileage consideration and provide the most convenient solution to the bank and its customers.
Answer by Mary Beth Guard:
You may be thinking of the discussion on geographic distribution of offices and back-up facilities that occurs in a recent white paper issued by three regulatory agencies.
On April 11, 2003, the FRB, OCC, and SEC published an Interagency Paper on Sound Practices to Strengthen the Resilience of the U.S. Financial System. The paper deals with business continuity for financial firms in the post-September 11 risk environment. The paper states that firms that play significant roles in critical financial markets should maintain sufficient geographically dispersed resources, including staff, equipment and data to recover clearing and settlement activities within the business day on which a disruption occurs. It goes on to note:
“Firms may consider the costs and benefits of a variety of approaches that ensure rapid recovery from a wide-scale disruption. However, if a back-up site relies largely on staff from the primary site, it is critical for the firm to determine how staffing needs at the back-up site would be met if a disruption results in loss or inaccessibility of staff at the primary site. Moreover, firms that use synchronous back-up facilities or whose back-up sites depend primarily on the same labor pool as the primary site should address the risk that a wide-scale disruption could impact either or both of the sites and their labor pools. As part of their ongoing planning process, firms with such back- up arrangements should strive to develop even more distant data back-up and operational resources that prove sufficient to recover clearing and settlement activities within the business day on which the disruption occurs. The business continuity planning process should take into consideration improvements in technology and business processes supporting back-up arrangements and the need to ensure greater resilience in the event of a wide-scale disruption. Interim steps a firm may take should be compatible with the objective of establishing even more distant back-up arrangements. The agencies expect that, as technology and business processes supporting back-up arrangements continue to improve and become increasingly cost effective, firms will take advantage of these developments to increase the geographic diversification of their back-up sites.”
There is no minimum distance requirement established at this time. In addition, this guidance does not address the recovery or resumption of trading operations or retail financial services.
First published on BankersOnline.com 06/2/03