However the mock exercise - which was conducted between 24 September and 12 October 2007 - found that while there may be significant impacts to the financial services sector during a pandemic outbreak, overall the industry will continue to operate and cope.

The exercise was specifically designed to stress test the business continuity plans of participating organisations and to allow participants to test individual contingency strategies against a realistic scenario.

Participants took part in the tests from their own office locations using e-mail and a secure exercise Web site. The exercise simulated absentee rates at up to 49% across the country. Critical infrastructures that the sector relies on were also stressed resulting in service degradation.

The Financial Services Sector Coordinating Council for Critical Infrastructure Protection and Homeland Security (FSSCC) sponsored the event in partnership with the US Treasury Department and the Financial and Banking Information Infrastructure Committee (FBIIC). The regulators have now released an in-depth report based on the initial results of the exercise.

The exercise highlighted the need for firms to include "pandemic-specific focus" in their business continuity planning, says the report. At the start of the exercise, more than one-third of participants had not developed plans to cope with a bird flu pandemic. But after the exercise 91% of participants said they would refine their organisations' business continuity plans.

Treasury deputy assistant secretary Valerie Abend, says the report demonstrate the clear need for conducting the exercise: "Even businesses who had pandemic plans in place found that a global avian flu outbreak poses complex issues and were able to identify areas where more work was needed."

"The exercise identified a number of issues that can be addressed to further strengthen the sector's resiliency," says George Hender, chairman of FSSCC. "Each organisation needs to look at the lessons learned from the exercise and incorporate the appropriate enhancements to their pandemic planning."

A similar planning exercise conducted by UK authorities last year found that increased staff absences following a bird flu pandemic could lead to branch closures and empty cash machines.

Across the financial sector as a whole, the heaviest impact of a pandemic would be upon the provision of customer-facing retail financial services.

However the City's wholesale financial markets would fare better in the event of a pandemic and would be able to operate. Due to the high level of automation, only very high levels of absenteeism would threaten the critical functions of wholesale firms.

Read the report on the US testing exercise here: