Pandemic flu scenario puts banks to the test

washington -- Don’t be alarmed if your local bank teller is looking a bit sickly over the next three weeks. It is only a cyber-illness.

Hundreds of banks and other financial institutions are participating in the largest test of its kind ever conducted to ensure the nation’s financial system can keep functioning in case of an outbreak of pandemic flu.

The test began Monday and is scheduled to run for three weeks. More than 2,700 financial institutions have signed up to participate, about five times the number the Treasury Department expected.

“This shows how much the business sector is focused on pandemic flu planning,” Valerie Abend, Treasury’s deputy assistant secretary for critical infrastructure protection, said in an interview.

Treasury, aided by other federal agencies and the private sector, has devised a three-week script for how a serious outbreak of bird flu might affect operations at banks, from the very biggest to the smallest, as well as at credit unions, securities firms and insurance companies.

The exercise also covers companies that provide crucial behind-the-scenes processing to keep the flow of checks and money circulating around the country.

According to the doomsday scenario devised by Treasury, a number of cases of bird flu in humans are reported overseas, and the illness spreads quickly to the United States by people traveling on international flights.

From that beginning, the Treasury scenario presents financial institutions with a number of challenges over the course of the three-week exercise.

The financial institutions got the first week’s scenario over the weekend from an Internet site where the test is being conducted.

The whole exercise is part of a plan unveiled by President Bush in May 2006 directing various government agencies to upgrade their planning for pandemic outbreaks.

The Government Accountability Office this month criticized the administration for failing to conduct sufficient tests to make sure that the agencies understand their responsibilities.

One of the biggest challenges financial institutions will face is how to cope with absenteeism. In week one, the Treasury exercise directs the financial organizations to assume that 25% of their workforce is not coming to work, either because of illness or because of fear of being infected or because they are staying home to take care of children who can’t go to school because the schools have closed.

To decide who is absent, the Treasury directs the institutions to assume that everyone whose last name begins with certain letters, which could cover the bank president down to the local teller, cannot come to work. The 25% absentee rate will jump to 49% in week two.

Abend said the various projections were compiled with the help of government scientists. Government financial regulators also helped put together scenarios on how the stock market would behave as well as what the value of the dollar and various commodities such as oil would be doing.

The dollar is projected to rise as investors seek a safe haven with the spreading global illness, and stock prices are projected to fall because of worries about what the pandemic will do to economic activity.

Absent employees wouldn’t be the only trouble facing the financial institutions. Under Treasury’s scenario, they also would have to cope with shrinking Internet bandwidths as more and more people tried to work from home.

Cash withdrawals from ATM machines are expected to rise sharply and getting the machines refilled would present problems because of rising absentee rates at the armored car companies and the difficulty of getting fuel for the armored trucks as gasoline refineries curtailed their production.

By the end of the three weeks, Abend said the government and the institutions participating would have a better idea of just what a flu pandemic would mean in the United States.

She said the test should get the institutions thinking about what they needed to do to improve their contingency plans.

After the three-week exercise is completed, Treasury plans to write a report detailing how institutions performed and what needs to be upgraded.