More than 60 major banks, exchanges and settlement firms volunteered to take part in the first detailed survey of how the financial system would cope with major operational disruption, which was launched by the UK's tripartite financial authorities - HM Treasury, The Bank of England and Financial Services Authority (FSA).

The FSA says the research found that core firms and financial infrastructure providers have highly resilient IT systems and can recover critical functions rapidly following major operational disruption. But the regulator identified the heavy concentration of primary and recovery sites in London as a potential weakness.

The research found that the bulk of the critical financial infrastructure can be recovered within just two hours of invocation of plans. Within four hours, core firms can recover an average of 60-80% of normal volumes and values for wholesale payments, trade clearing and settlement. Most core firms can restore 80-100% of normal retail payment volumes by the next working day.

Resumption of trading, however, would be more gradual with less than half of participants able to recover 80-100% of normal trading volumes by the next working day.

Hector Sants, managing director of the FSA's wholesale firms division, says: "It is encouraging that the project has established that the core parts of the financial system appear to have highly resilient IT systems that allow them to recover critical functions with impressive speed."

But although the financial IT infrastructure was found to be fairly resilient, the FSA says there are several areas where there is scope for firms to improve their planning and preparation for major operational disruption.

The FSA recommends that firms collaborate with key third parties to bring about more co-ordinated planning, testing and risk mitigation. One of the major findings of the exercise was a lack of integration of continuity arrangements between firms and third party suppliers. This includes outsourcing providers, key suppliers, exchanges, clearing houses, connectivity providers and trading counterparties.

Firms also need to focus more on the impact of a major incident on staff. For example, the survey found that more than than half of participants do not address the issue of staff fatalities in their plans. The FSA says other responses indicated that firms could improve plans by a more thorough understanding of emergency services' procedures, staff training, and realistic planning of how a crisis situation could unfold.

Based on this research, the FSA says it will not be introducing new regulations but is recommending that wholesale payments, trade clearing and settlement should recover 60% to 80% of usual values and volumes within four hours of an attack, rising to 80-100% by the next working day. These targets would only be applicable to core firms and financial infrastructure providers.

Last month, Britain's financial sector conducted a market-wide business continuity test, which involved 80 companies, to assess firms' readiness for dealing with a major crisis.

Business continuity planning is a key focus of Finextra's annual financial markets forum Finexpo, taking place in Cabot Hall, Canary Wharf in January. The free one-day event will feature presentations from the Bank of England's Stephen Denby, who will update delegates on the Tripartite Authorities recent benchmarking and simulation exercises, and Steve Kirk of LCH.Clearnet who will recall the events of the 7 July London bomb blasts when the clearing house was forced to evacuate its London headquarters. To find out more and register for a free pass to the event visit www.finexpo.com.