HM Treasury, the Bank of England and the Financial Services Authority on Wednesday jointly published an updated Memorandum of Understanding for Financial Stability.
A framework for co-operation between the three authorities in this area was first set out in a Memorandum of Understanding in 1997. It has proved to be "robust and effective" as a basis for responding to financial stability risks, according to the three bodies.
However, financial markets and institutional roles have evolved over the past eight years and FSA explained earlier this week that it is "now appropriate to reflect those changes in the MoU itself".
In particular, according to the UK's financial regulator, the response frameworks for managing both financial crises and major operational disruption have advanced significantly and this is spelled out in the new text.
The Memorandum sets out a framework for monitoring and assessing, and coordinating the authorities’ responses to, financial stability risks, including business continuity issues. The process is overseen by the Tripartite Standing Committee, comprising the Chancellor of the Exchequer, the Governor of the Bank of England and the Chairman of the Financial Services Authority.
The Memorandum also sets out the roles and responsibilities of each authority. The Bank of England contributes to the maintenance of the stability of the financial system as a whole, drawing on its macro-economic and financial analysis and on its operational involvement in markets, payment systems and other elements of market infrastructure.
The Financial Services Authority is responsible for the authorisation and supervision of financial institutions, for supervising financial markets and securities clearing and settlement systems, and for regulatory policy in these areas.
HM Treasury, meanwhile, has responsibility for the overall institutional structure of regulation and the legislation that governs it.
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