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Expecting the Best—Preparing for the Worst


Julie L. Stackhouse
Thursday, July 1, 2004

It's your worst nightmare. An unexpected disaster occurs, threatening the lives of your bank's employees and customers and your community's vitality. Catastrophic events such as earthquakes, tornadoes, floods, fires and those that occurred Sept. 11, 2001, pose substantial risks to financial institutions.

No matter how severe the disaster, there are many preparations your bank can make to reduce your risks. A good first step is to prepare your employees and their families to survive the immediate effects of a disaster-both at work and at home. At a minimum, your plan should include the following components:

  • access to emergency supplies—inside and outside of your facility,
  • evacuation procedures and
  • methods of communicating with your employees.

Remember, cellular networks often interface with land-line networks. This means that many telephones will not work during a regional disaster. Establish an off-site meeting location where key employees can gather; then, conduct drills periodically.

Contingency preparedness also involves protecting your bank's physical assets. Building codes are intended to keep buildings standing during a disaster; however, they do not ensure that a damaged facility can support continued business operations. To ensure that your bank can function properly:

  • maintain up-to-date insurance for recently purchased equipment;
  • back up data regularly, and store it off-site;
  • consider alternative power sources;
  • have your building evaluated by a professional engineer to ensure it will be safe and structurally sound during disasters; and
  • establish strategic partnerships with other businesses that can provide assistance-such as backup facilities, equipment and supplies-during an emergency.

Finally, don't forget about contingency liquidity planning. Your bank's traditional funding sources may not be readily available during a disaster. The Federal Reserve discount window can provide credit to eligible institutions that experience temporary funding needs, and we encourage you to file a Board of Directors resolution and to pledge contingency collateral.

No business can be completely prepared for every contingency; however, the tips I've outlined here can help you build a solid plan. For more information on making discount window credit a part of your contingency planning, contact Frank Bufe, discount window manager, at 1-866-666-8316, or visit the discount window website at