Instead I want to discuss how to approach some of the challenging issues faced by many central banks as we seek to decide how best to organise our work and to allocate resources in order to promote financial stability. We need to be clear, accountable and transparent as to how we devote our resources in this area. And just as the financial system becomes more complex, so the judgements as to what we do and what we do not do are increasingly difficult. That is why we need a framework – a set of organising principles – that enables us to provide context and understanding to our endeavours, to provide a source of focus and rigour to our approach, and to motivate our people. The issues are, I believe, of general application. Though you will forgive me I am sure if I start by looking at the framework within which the Bank of England, as a non-regulatory central bank with a remit for system-wide stability, addresses the vulnerabilities. 2. Challenges in Creating a Framework  i)  Monetary Policy  I want to start by considering the governance of the Bank’s accompanying mandate, the conduct of monetary policy. This highlights the clarity of our accountability in the monetary policy arena. In line with many central banks, we have a mandate in statute – the Bank of England Act – to conduct monetary policy. The Government sets a target inflation level which we are required to meet.
We need to know how we will work with and communicate with public authorities and with the private sector. There is a different set of factors which impact our decisions in this area. First, our “must do” roles are dependent on crisis preparation and an adequate general understanding of how the financial system operates, with all the complexities entailed. Second, while each national authority has its specific responsibilities to fulfil, the speed with which decisions would then need to be made and actions implemented make it also essential to act effectively as a single operational unit. In the UK the FSA, HMT and the Bank have developed mechanisms designed to turn this into reality and to provide necessary confidence to the market. And third through testing programmes, we can obtain feedback as to whether our efforts are likely to prove successful and to refine preparation as we go along. The costs to the economy of failure would be high and the expectation is that we would be well prepared. This puts a strong onus on collecting in advance up to date information on firms and markets, or being confident of its availability and source. And also of regular and exacting testing programmes – working with other authorities and with the private sector. 6. Conclusion  So in conclusion, the field of financial stability oversight presents us with plenty of challenges.