[A-List] UK state: emergency City takeover

["Michael Keaney" <michael.keaney@xxxxxx>]

Treasury may be given power to run markets after terrorist attack
By Philip Thornton
The Independent
26 February 2003

The Treasury could be given extraordinary power to take over the running of
the City of London's financial markets in the event of a terrorist attack or
natural disaster.

Ministers would be allowed to suspend the Stock Exchange and other markets,
and prohibit banks and investors from trading in the wake of a major
catastrophe. The proposals are in a Green Paper published yesterday. The
Treasury emphasised that legislation was only one option.

The paper is the result of discussions between Whitehall in the City in the
wake of the terrorist attacks of 11 September 2001, which led to the
voluntary closure of stock markets in London and New York.

The Treasury said this power would not be available in the case of a
financial crisis and that it would not have sought to use it after 11
September. It says that the Government is considering tabling legislation to
be used in "extreme circumstances" such as a terrorist outrage, a weather
disaster or a computer virus that threatened to bring the City to a halt.

The Bill would contain two new powers: to suspend existing financial
obligations and to close stock exchanges to prevent investors trading.

Under the first power, the authorities would be allowed to suspend the need
for investors to settle their deals, to allow them to concentrate on efforts
to rebuild their business.

The "direction power" would be used if the exchanges, which are private
companies, were worried about the legal consequences if they decided to
close.

Launching a consultation exercise, Ruth Kelly, the Financial Secretary to
the Treasury, said: "The 11 September attacks on the United States showed
the problems that physical disruption on such a scale brings for the
financial system, as exemplified by the four-day closure of the New York
Stock Exchange. Financial services play a vital role in the UK economy. This
makes it particularly important to be sure that we have good arrangements in
place to maintain the financial system's resilience during major operational
disruption."

The Government said it was aware that legislation could have disadvantages,
if it led to uncertainty over how the authorities would use their new powers
or led private-sector organisations to make less rigorous preparations for
dealing with problems themselves.

"These possible disadvantages - and the primacy of the private-sector role -
lead the Government to believe that any new legislation should only be used
in extreme situations - and never in a purely financial crisis - and only
with support from the private sector," the Green Paper said.