Besides the geographic concentration of financial institutions within New York City, some critical market functions, particularly in the clearing and settlement of funds, securities, and financial contracts, rely on only a few entities. When even one of those entities has operational problems, many market participants feel the effects.
Moreover, significant telecommunications vulnerabilities resulting from concentrations became evident when failures affected numerous institutions, both within and outside lower Manhattan. In fact, Federal Reserve staff were personally involved in setting priorities for the restoration of key telecommunications circuits supporting the financial services system during the week of September 11. Third, the events of September 11 graphically demonstrated the interdependence among financial-system participants, wherever located.