Financial Crisis Management
The Bank's role in financial crisis management is set out in the Memorandum of Understanding (MoU) between the Bank, HM Treasury and the Financial Services Authority. From the MoU, one of the Bank's responsibilities is to be able in exceptional circumstances to undertake official financial operations to limit the risk of problems in or affecting particular institutions spreading to other parts of the financial system. The MoU also established arrangements for a Standing Committee of the three bodies to ensure effective exchange of information and to co-ordinate the response to a crisis. Given the international nature of UK financial firms, and London's role as an international financial centre, coordination amongst authorities cross border to manage a financial crisis is also important. The Bank is a member of a number of international groups that consider this, within Europe and wider.
The Bank also contributes to the debate on issues relating to the international financial architecture. In this context the Bank has helped to expand thinking on a range of topics, such as potential crisis support facilities and the orderly resolution of country debt crises. Sovereign crises clearly differ in form and severity, so flexibility in the official sector's approach to dealing with them is required. However, discretion also carries possible costs to both the private sector and the official community and the difficulty is therefore in defining an optimal framework.
The work is linked to the Bank's surveillance effort which aims to help identify possible risks to financial stability and hence promote risk mitigation by policy makers and private sector risk managers.
Key Resources
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Memorandum of Understanding between HM Treasury,
the Bank of England and the Financial Services Authority
Download PDF (50k) |
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Developments in Financial Sector Crisis Management Download PDF (92k) |
