Before 9/11 - New York's twin towers

London's financial hub needs "a comprehensive and robust plan" to cope with a September 11 style terror attack, the City's watchdog has said.

Following a recent "event" at the Financial Services Authority's HQ it has taken "additional steps to buttress its contingency arrangements, including the development of its back-up site".

The new emergency nerve centre - at a secret location - will keep the capitals top 35 financial institutions functioning should an attack or disaster hit the City.

Staff have tested the facility and could be "up and running here in an hour" of an onslaught similar to that seen on September 11.

In future the regulators are seeking to avoid the aftermath of the New York attack - when panic saw stock market values crash and economic shockwaves triggered a global slowdown.

FSA managing director, Michael Foot, cautioned that "none of us can afford to be complacent in an environment where the potential threat is so great".

"The FSA, along with the Treasury and Bank of England, has worked closely with the financial services industry to raise standards," he said.

"Consequently, the ability of key firms and the authorities to respond to a disaster or operational failure has improved markedly over the past year."

The FSA has stepped assessments of the disaster recovery readiness of the 35 key firms it regulates. "The response of these firms has been impressive," it concludes.

But between 30 and 40 per cent - some 4000 - of smaller financial services firms still have a long way to go, it warns

"Improving business continuity arrangements is an ongoing process requiring leadership from the top and all of those involved are continually looking at ways to up our game," said Foot.

"It is important we get it right since London is a major financial centre and any interruption to business here would have an impact globally."