In exceptional circumstances, for instance where a support operation is being considered, the Standing Committee meets at principals level, comprising the Chancellor of the Exchequer, the Governor of the Bank and the Chair of the FSA (or senior alternates). Using their expertise, and from the perspective of their responsibilities, the Bank and the FSA will assess the seriousness of the crisis and its potential implications for the stability of the financial system and provide separate assessments to the Treasury, together with their views on the options available to the Chancellor. The Standing Committee may then discuss the most appropriate response and ensure effective co-ordination of response, while respecting formal responsibilities. Responsibility for the authorisation of a support operation in exceptional circumstances rests with the Chancellor of the Exchequer.
In any such exceptional circumstances, the Authorities' main aim would be to reduce the risk of a serious problem causing wider financial or economic disruption. In acting to do this, the Authorities seek to minimise both moral hazard in the private sector and financial risk to the taxpayer arising from any support operation.
The Authorities also maintain a framework for the management of an operational crisis:
■ The Treasury will ensure that ministers are kept informed of developments so as to be able to take key decisions without delay and liaise with other UK government departments;
■ The Bank will ensure the orderly functioning of the financial markets, including the maintenance of adequate liquidity. As banker to the banking system, the Bank has specific responsibility for maintaining operational contacts with market participants so as to monitor and facilitate the functioning of UK markets. This may include the provision of liquidity assistance or other support operations agreed within the framework;
■ The FSA will monitor the health of institutions that fall within its regulatory remit and ensure, as far as is appropriate, continuing compliance with regulatory standards.