The Bank of England or BoE is tasked with the duty of protecting and enhancing the stability of the United Kingdom’s financial system. As Kavan Choksi UK says, to meet these objectives the BoE needs a broad set of polices, which includes macroprudential policy with input from a number of key statutory bodies.
Kavan Choksi UK sheds light into BoE’s statutory bodies that make contributions to financial stability
The Bank has three major statutory bodies with responsibilities to make particular contributions to UK financial stability. The first among them is the Financial Policy Committee (FPC). It identifies, monitors and takes actions for removing or reducing systemic risks. FPC does so with the aim of protecting and enhancing the resilience of the financial system of the United Kingdom. FPC or also sets macroprudential policy, which implies to policies associated with the stability of the UK financial system as a whole, instead at the level of the individual firm. The secondary objective of the FPC is to support the economic policy of the government, which includes its objectives for employment and growth.
The Prudential Regulation Authority (PRA) is another important statutory body that plays a role in the financial stability of the United Kingdom. PRA is responsible for the micro-prudential regulation of insurers, designated investment firms, credit unions, building societies and banks. They create and maintain policies that have to be followed by regulated firms. PRA supervises financial institutions to promote their safety; while striving to lower any kind of adverse impact they may have on the stability of the financial system.
As per Kavan Choksi UK says, the PRA has to take certain financial stability considerations into account while advancing its general objective to promote the soundness of the firms regulated by the body. The Prudential Regulation Authority does not seek to operate a zero-failure regime. It also has an insurance objective of securing an appropriate level of protection for policyholders, alongside secondary objectives to facilitate effective competition. The PRA additionally supports the global economic competitiveness of the United Kingdom and fosters medium- to long-term growth that is in line with international standards. Important decisions of the PRA are made by the BoE’s Prudential Regulation Committee (PRC).
The third statutory body of the BoE that makes contributions to financial stability is the Financial Market Infrastructure Committee or FMIC. This committee is responsible of overseeing the duties of the BoE that are associated with financial market infrastructure (FMIs) in support of its financial stability objective. These FMIs are crucial for the stable, secure functioning of the financial system of the United Kingdom and provides a range of essential services that are a part of daily life. They also help financial market participants manage risks. Owing to the role of the UK as a global financial hub, the secure, dependable operation of FMIs is essential internationally. The Bank’s FMI oversight reinforces financial stability by making sure that FMIs have resilient risk-management frameworks for both routine and stressed conditions. The FMIC’s secondary objective is to encourage innovation in FMI services. This includes advancements in infrastructure, in order to enhance the quality, efficiency, and cost-effectiveness of these services.
