Banks’ coronavirus plans won’t work, say experts
For trading floors, working from home creates myriad problems

 

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By Paul Clarke March 9, 2020

Investment banks have rushed to implement plans to protect their workforce from the coronavirus outbreak. The bad news: they won’t work.

Financial News spoke to eight epidemic and medical experts who all agreed that banks’ disaster-recovery plans would not prevent a spread of Covid-19 in the financial sector.

“The short answer is almost undoubtedly no, they [banks] are not adequately prepared,” said Jonathan D Quick, adjunct professor of global health at Duke University and author of The End of Epidemics: The Looming Threat to Humanity and How to Stop It, adding that financial services organisations have not briefed their employees well enough.

“It’s like the coach chalking a play on the board, letting the team look at it for a moment, ending the ‘preparation’ with a hearty ‘play ball’,” he said.


Last week, FN revealed the first case of coronavirus at a large financial institution in the UK as an HSBC employee tested positive for the respiratory illness. The bank evacuated 100 staff from its UK headquarters in Canary Wharf and contacted clients the senior research analyst had recently visited.

On the same day, 1,200 workers at S&P Global, the rating agency, were sent home after the affected HSBC analyst reportedly visited its London office. A Deloitte employee working in the City was also diagnosed with the virus last week.

Many banks in London have pulled the trigger on their disaster-recovery plans, which involve splitting their trading teams across multiple sites in a bid to reduce the risk of transmission. Unlike other parts of the business, where employees can easily work remotely, regulatory, compliance and technological restrictions mean banks have opted to keep trading floors open.

“Are we doing enough? Maybe not, but our business continuity guys have never been busier,” said one senior trader.

“These measures are reactive and not really adequate for the long term. In the short run they may prove minimally effective,” said Geary Sikich, author of Protecting Your Business in a Pandemic.

JPMorgan has split its trading floors in both the US and UK, moving some of its London-based staff to its disaster-recovery office in Basingstoke.

Citi has moved 10% of its Canary Wharf-based trading team to its back-up office in Lewisham. However, sources within the trading division told FN that up to half of some teams have been shifted. Citi’s ambition is to have a third of trading staff in its London headquarters, and the remaining employees between its recovery site and working from home. The teams will rotate across the locations.

Goldman Sachs moved around 200 employees to its recovery site in Croydon, south London as a test on 5 March, but has yet to shift traders permanently. Morgan Stanley has switched trading staff to its contingency office in Hounslow, near Heathrow Airport, but this is not a formal activation of its plan, according to a person familiar with the matter.

David Hesketh, a former Merrill Lynch trader and founder of TradingHub, a fintech firm that works with investment banks on market-abuse detection, said: “It’s not unprecedented for them to have people working in these disaster-recovery sites, because they need to test them regularly. However, having groups of people working on them because there’s a threat they’re trying to mitigate is something we haven’t seen since 9/11.”

However, Dr Simon Clarke, an expert in cellular microbiology at the University of Reading, said banks’ contingency plans were a “sub-optimal solution”. “Reducing the density of workers in one place reduces, but by no means eliminates, the chance of transmission,” he said. “Fewer people is less of a problem, but they still have to travel and commute to these locations. In an ideal world, they would stay close to the office to reduce their chances of exposing themselves outside of work.”

Medical experts admitted there was little more banks could do to prevent the virus spreading, beyond isolating their employees.

For trading floors, however, working from home creates myriad problems. Aside from equipping traders with their usual set-up of ultra-fast broadband and multiple computer screens, banks ban personal mobile phones on the trading floor and require all calls to be recorded – rules that are difficult to enforce from a home office.

The Financial Conduct Authority has remained steadfast in its requirements for traders to work remotely, which traders acknowledge are difficult to meet. In a 4 March statement, the regulator said banks need to “use recorded lines when trading and give staff access to the compliance support they need”.

“If firms are able to meet these standards and undertake these activities from back-up sites or with staff working from home, we have no objection to this,” it added.

Mike Hampson, chief executive of consultancy Bishopsgate Financial, said: “The current coronavirus outbreak is highlighting exactly why the FCA has been pushing for all institutions to demonstrate their operational resilience in the face of extreme and possibly unforeseen circumstances.”

Clarke added that financial services organisations are ultimately limited in what actions they can take to prevent the spread of the virus. “The fact is, there is only so far you can limit people’s movements to reduce risk. We don’t live in an authoritarian state.”

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