Business Continuity
Business continuity is a state of uninterrupted business
operations. Business continuity refers to all of the organisational, technical
and staffing measures employed in order to ensure the continuation of core
business activities in the immediate aftermath of a crisis. Business continuity
in financial sector is especially important for institutions the uninterrupted
functioning of which guarantee stability of the Lithuanian financial system,
such as the Bank of Lithuania, the major commercial banks, a joint-stock company
Central Securities Depository of Lithuania, Vilnius Stock Exchange and other
institutions.
Payment systems and securities settlement systems
significantly contribute to smooth functioning of financial markets. They form
an infrastructure which is used to transfer money and financial instruments
between market participants. Annual amount of payments processed via payment
systems exceed the national GDP1 a few times. Central banks in many counties use
payment systems to perform their key functions, such as monetary policy
operations2. Securities settlement systems are used not only to pay for
transactions3 made within regulated markets, but also for collateralization4. One
can say that payment and securities settlement systems have an indirect effect
on every individual who uses payment or securities settlement services.
It is legislation5, various international standards,
guidelines and principles that require business continuity planning and
management to be done. Most commonly used are the Core Principles for
Systemically Important Payment Systems approved by the Bank for International
Settlements (Core Principle VII: security and operational reliability) and
Recommendations for Securities Settlement Systems (Recommendation 11:
operational reliability). The Bank of Lithuania acting as the system overseer
applies these requirements to such payment systems as LITAS-RLS and LITAS-MMS,
as well as the Securities Settlement System. In mid-2009, The Business
Continuity Oversight Expectations for the Systemically Important Payment Systems,
that were approved by the Eurosystem will start to be applied to euro payment
systems such as TARGET2-LIETUVOS BANKAS and LITAS-PHA. After approval of the new
standards for ESCB-CESR securities clearing and settlement systems in the EU,
the requirements set in the field of business continuity are to be applied to
the Securities Settlement System functioning in Lithuania.
It should be noted that not only preparedness of each
institution to ensure business continuity is important, but also important are
the measures that create conditions for coordinated operations of institutions
before a critical event (business continuity testing) and crisis (independently
from its nature: operational or financial) period, information sharing and
coordination of actions. The organization of the said processes is an urgent
task for Lithuania today.
Market participants and all who may be interested in business
continuity aspects are invited to use the ESCB-worked-out glossary of business
continuity terms and relevant information about business continuity initiatives
(click here).
1 In 2007, the total value of operations via LITAS-RLS system was higher the Lithuanian GDP by 2.4 times.
2 The Bank of Lithuania performs foreign exchange purchase/sale operations.
3 There are two regulated markets functioning in Lithuania with Vilnius Stock Exchange as their operator.
4 ESCB central banks provide liquidity for market participants only if eligible collateral is delivered, which is usually done through securities settlement systems.
5 Article 4 of the Law of the Republic of Lithuania on Settlement Finality in Payment and Securities Settlement Systems stipulates for system operators also to provide the business continuity plan in the systems‘ rules.
