The newly formed Financial Services Authority will be the guardian of prudence and good conduct in the UK market, while the Bank of England will take care of liquidity and anything it sees as threatening the stability of the financial system.
The FSA and the Bank are expected to work closely together and inform each other immediately of any problem that might need concerted support. “In all cases,” says a memorandum of understanding between them and the treasury, “the Bank and the FSA would need to work together very closely and they would immediately inform the treasury, in order to give the chancellor of the exchequer the option of refusing support action”.
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