Commentary Part 4 – Collaboration between Treasury and Bank of England, Fca Or Pra Section 65: Memorandum of understanding: crisis management
519.Subsection (1) requires the Treasury on the one hand and the Bank of England and the PRA on the other to prepare and maintain a memorandum describing how they will comply with their duties under section 64. Subsection (2) specifies that the memorandum must address: what the Treasury and the Bank regard as a material risk for the purposes of section 58(1); the steps to be taken when the Bank has given a public funds notification under section 58(1) or 59(2); the respective roles of the Treasury, the Bank and the PRA in relation to the taking of steps to resolve or reduce threats to the stability of the UK financial system how the Treasury, the Bank and the PRA will cooperate in fulfilling those roles; the use by the Treasury of their powers under section 61; matters connected with the Bank’s compliance with a direction from the Treasury; and the obtaining and sharing of information. In addition, the Treasury, Bank and PRA may agree to include in the memorandum other matters relating to financial stability or the regulation of financial services and which affect the public interest. For example, the memorandum could include provisions about the regulation of a financial institution which might seriously affect diplomatic relations between the United Kingdom and a foreign country.
520.The memorandum is to relate to how the Treasury, the PRA and the Bank are to coordinate their functions. However, subsection (4) provides that the memorandum need not relate to the relationship between the PRA and the Bank and so need not contain provision relating to, for example, how the PRA and Bank will share information or keep each other informed about matters of common interest.
521.Subsection (5) enables the parties to the memorandum to include in the memorandum provisions which relate to the functions of certain other persons, where that person consents. Subsection (6) specifies the persons whose functions may be included in the memorandum (the FCA, the scheme manager of the FSCS and any other body exercising functions in relation to the regulation of financial services or the stability of the UK financial system). This means, for example, that if the situation being managed under the provisions of the memorandum involves the payment of compensation from the FSCS, the memorandum could set out how the scheme manager of the FSCS would coordinate with the PRA, the Bank and the Treasury in those circumstances.
522.Subsection (7) requires the Treasury to publish and to lay before Parliament a copy of the memorandum.