Jun. 11--Financial stability has long been the Cinderella of the Bank of England. Despite having its very own deputy governor, its prestige has lagged behind that of the monetary wing and the content of its Financial Stability Reports were ignored until the credit crunch descended almost two years ago.

When, in the pre-Northern Rock era, members of the Court, the Bank's non- executive board, requested a policy document on the financial stability mandate it was fobbed off.

Now, finally, after the worst banking crisis since the period running up to the First World War, it is being reinvigorated with its own "independent" Financial Stability Committee (FSC) designed to mimic the success of the Monetary Policy Committee.

Joining governor Mervyn King and his two deputies, Paul Tucker and Charles Bean, on this new committee will be four non-executives.

For the moment they include Roger Carr, the chairman of Cadbury.

He knows a great deal about how easy it is to make the wrong bets on the financial markets from his experience with booze group Mitchells & Butler where he abandoned the chair for a safer haven after the company nearly drowned in a sea of toxic hedges.

Other non-executives will include veteran industrialist Sir David Lees, the Prudential's departing and capable chief executive Mark Tucker and Harrison Hurst Young, who heads the risk committee at Commonwealth Bank of Australia.

Fortunately, until now the Aussie banks like the Spanish banks have weathered the global hurricane rather well.

This is largely because of intrusive regulation and through the building of strong reserves in profitable years.

These are useful lessons for the UK banks as they seek to extricate themselves from a mother load of bad debts.

The big issue for the FSC is where the borders are drawn with the Financial Services Authority. A lack of clarity was one of the great weaknesses of the post-1997 settlement which saw banking supervision hived off to the FSA.

Part of the new role of the FSC will be to decide when to use the Bank's stabilisation powers -- the ability to step in and take control of failing banks. This will be extraordinarily hard if most of the information rests with the FSA.

The view in the Treasury is that the Bank will have no trouble in obtaining all the data it needs if it asks. That is not good enough.

If it is to actively intervene it needs direct access to all the regulatory information and intelligence available before the event not after.