Banking Act | Special Resolution Regime | Risk Reduction Initiatives | Payment Systems Oversight | International Financial Architecture | Crisis Management

The Bank's role in crisis management is set out in the Memorandum of Understanding (MoU) between the Bank, HM Treasury and the Financial Services Authority. The MoU 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.

Financial crisis management

One of the Bank's specific responsibilities, under the MoU, is to be able, in exceptional circumstances and with the Chancellor's approval, to undertake official financial support operations to limit the risk of problems affecting particular institutions spreading to other parts of the financial system.

Financial crisis management also has an important international dimension. Given the international nature of many UK financial firms, and London's role as an international financial centre, it is important that UK and foreign authorities are prepared to manage a financial crisis affecting a cross-border financial firm. The EU MoU on Financial Stability sets out the principles and processes that would guide co-operation between authorities within the EU in the event of such a crisis. The Bank is also working alongside foreign authorities in a number of other international groups on international financial crisis management planning.

Operational disruption

The UK authorities also maintain a framework for co-ordination in the management of an operational crisis.

Testing is an important element in improving preparedness for operational crises. The Bank is involved in the design of exercises for the market at large along with the other Tripartite Authorities. A good deal of effort has been directed at assessing the resilience of the main firms and infrastructures via The Resilience Benchmarking Project. A more recent exercise has been the Market-wide Exercise based on a flu pandemic scenario.

As in the case of financial disruption, cross-border coordination amongst authorities may be an important element in managing a major operational disruption (see, for example, the Joint Forum High-level principles for business continuity). The Bank hopes to explore the potential for more coordinated cross-border arrangements in future - for example, in the face of an influenza pandemic.

Key Resources

	Memorandum of Understanding between HM Treasury, the Bank of England and the Financial Services Authority Download PDF (50k)
	Developments in Financial Sector Crisis Management Download PDF (92k)
	Memorandum of Understanding on Cooperation Between the Financial Supervisory Authorities, Central Banks and Finance Ministries of the European Union on Cross-Border Financial Stability 1 June 2008 Download PDF (309k)