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".
Howard Davies, founding chairman of the FSA, says the procedure is clear: "If you have an institution in difficulty, it should come to us [the FSA] first. We have to decide if there is any market-based measure that can be taken."
That's the theory. But what happens in the "fog of war" that usually descends when there is such a threat to the system? Will there be time for a banker in trouble to beetle off to Canary Wharf to see Davies, then for Davies to beetle off to the City to see governor Eddie George at the Bank of England?
Haven't they heard of telephones? you will ask.