And a second theme is the need to bear in mind the distinction between the stability of individual institutions and the stability of the system. Bank of England's role in financial stability But if I may, I'd like to precede all this with a brief explanation of why we are discussing this topic here – that is, why we at the Bank of England have a keen interest in promoting debate in this area. As many of you may know, in 1997 the UK Government took the decision to separate banking supervision from the central bank and unify it with the rest of financial supervision under the new Financial Services Authority. At the same time, the maintenance of stability in the overall financial system was clarified as one of the three core tasks of the Bank of England, along with responsibility for monetary stability and promotion of efficiency and effectiveness in the financial system. So we continue to take a strong interest in the issue of overall systemic stability, including how to monitor it, how to promote it, and how best to deal with any stresses that might arise. Obviously co-ordinating our efforts with the FSA's supervision of individual institutions and the Treasury's legislative responsibilities is key. We work hard at fostering a close relationship, helped by the fact that I am a member of the FSA Board and Howard Davies, who is giving the key-note address tomorrow, is a non-executive director of the Bank.
The information provided by the SME Credit Bureau can further support efforts by banks to strengthen risk management for their SME portfolios, regardless of the level of sophistication and size of the institutions. Banks with an SME credit model already in place can benefit from the Bureau information in various ways. For example, as the Bureau rating is determined based on diverse information obtained from various sources including CCRIS, trade credit data and the Companies Commission of Malaysia, banks can use such information to bridge any information gaps and address the limited pool of internal data available for their internal models. Such gaps currently exist, as banks in general are highly dependent on borrower information alone. In addition, given the diversity of information available within the SME Credit Bureau, banks would now have access to information on various economic sectors that may not be available within existing credit portfolios. At the same time, Bureau ratings could be used by the banks to validate the robustness of their own internal models by comparing the ratings produced between their internal ratings and that by the SME Credit Bureau. For smaller and less sophisticated banks, the Bureau information will supplement the current SME credit assessment methodology that is traditionally qualitative in nature. Such banks will be able to obtain quantitative information from the Bureau database to enhance the overall credit evaluation process, thereby supporting more informed and objective credit decisions.