Treasury legislation to protect IT infrastructure 'unnecessary'

Plans by the government to introduce legislation to tackle the effect of a major electronic attack on the UK’s financial markets...

Plans by the government to introduce legislation to tackle the effect of a major electronic attack on the UK’s financial markets are unnecessary, analysts have warned.

A Treasury green paper, announced on 25 February, highlights the possibility of IT problems such as a computer bug or virus incapacitating stock exchange or other systems.

The Financial System and Major Operational Disruption paper talks of contingency plans for IT related problems, including virus attacks or software flaws, a 11 September-style terrorist attack or even severe adverse weather conditions.

“The core question is whether in principle, it would be useful to have new legislation to help promote order in the financial system in the face of major operational disruption,” it said.

Financial markets should take the lead in ensuring that they have adequate safeguards against threats to their infrastructure, the paper added.

But analysts questioned the need for the legislation. Most of the larger market institutions already have sophisticated technology in place to guard against electronic attacks, and avoid a single point of failure.

“What does the government know?” said Duncan Brown, consulting director at analyst firm Ovum. “Everyone in financial services understands the risk of electronic attack.”

The green paper also suggests two powers to suspend certain financial obligations: provide a breathing space; and a power to direct financial “infrastructure’’ such as exchanges, clearing houses, settlement systems and payment systems. This would provide a means of interventions, but only in formal markets and systems at the heart of the financial system

Additional reporting by Nick Huber

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