Financial Stability Functions
In practice, the Bank's financial stability role has a number of dimensions.
- Risk Assessment: monitoring current developments
both in the UK and abroad - including links between financial
markets and the wider economy and, within financial markets,
between different participants - to identify key risks to
the financial system. For example, the Bank examines the overall
financial position of borrowers and lenders, the links between
financial institutions and the resilience and vulnerability
of households, firms, financial institutions and international
financial systems to changes in circumstances. The Bank also
conducts risk assessment and research on the major developed
countries and the main emerging-market economies.
More on Risk Assessment
More on International Finance
- Risk Reduction: reducing vulnerabilities
and increasing the financial system's ability to absorb unexpected
events. This can involve the promotion of codes and standards
over a wide field ranging from accounting to improving legal
certainty, and management countries' external balance sheets.
More on Regulatory Structure
- Oversight of Payment Systems: oversight
of the main payment and settlement systems in the UK that
are used for many types of financial transaction - from paying
wages and credit card bills to the settlement of transactions
between financial institutions.
More on Payment and Settlement Systems
- Crisis management: developing and coordinating
information sharing within the Bank, with the FSA and HM Treasury,
and with authorities internationally to ensure future financial
crises are handled and managed effectively. In undertaking
this work, the Bank advises on and implements policy measures
to mitigate risks to the financial system.
More on Financial Crisis Management
Lender of last resort
In exceptional circumstances, as part of its central banking
functions, the Bank may act as 'lender of last resort' to financial
institutions in difficulty, in order to prevent a loss of confidence
spreading through the financial system as a whole. This role
is set out in the Memorandum of Understanding, which also establishes
arrangements for a Standing Committee of the three bodies to
ensure effective exchange of information and to co-ordinate
the response to a crisis.
More on lender of last
resort
International financial stability
As part of its responsibility for financial stability, the Bank
of England analyses developments in overseas financial markets
and considers their impact on the UK financial sector. It contributes
actively to the debate through the International Monetary Fund
on financial crisis prevention and resolution. It is represented
on a number of international supervisory committees and has
close links with supervisory institutions outside the UK.
More
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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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The Tripartite Standing Committee: Meetings and Publications, HM Treasury document Download PDF (100k) |
