The Federal Reserve and securities regulators have formalized an agreement to share information about the country's investment and commercial banks, the Fed said Monday.
The memorandum of understanding between the Fed and the Securities and Exchange Commission outlines the scope and mechanism for sharing information related to the Fed's discount window and other areas.
"It formalizes and strengthens the ongoing cooperation between our two agencies to enhance the stability of the financial system," Fed Chairman Ben Bernanke said in a statement issued jointly with the SEC.
Urgent regulatory changes have been in the works since the Fed helped rescue investment firm Bear Sterns in March and opened its discount window for emergency cash to other U.S. investment banks, which are currently supervised by the SEC.
"This agreement will permit the expanded sharing of information on a confidential basis, and help ensure that regulated entities receive a coherent message from Uncle Sam," said SEC Chairman Christopher Cox.
Fed officials have argued they need supervisory oversight of investment banks if the central bank is going to lend them money.
As a result, the memorandum is something of a stop-gap measure to tide authorities' over until new regulations can be passed by Congress.
This time-consuming process will almost certainly take lawmakers into next year and into a new White House administration following November presidential elections.
The Fed's emergency action in March, designed to stem a financial market panic over subprime mortgage losses, was the first time since the Great Depression that the Fed had risked taxpayers' money by allowing investment banks access to its lender-of-last resort liquidity facilities.