The FPC is a statutory body of the Bank of England. It promotes the smooth operation of England’s financial system. Like other regulatory bodies, it preserves the system’s stability and aims to create an unfavorable environment for fraud and other crimes. Doing so protects consumer rights, commercial investments, and public economic interests in England.
When the Financial Crisis of 2007 to 2008 struck England, it had no mechanisms to prevent or review the problem. Existing regulatory bodies examined different aspects of the system and did not always share data. Consequently, no agency noticed as risks developed, accumulated, and compounded until the crisis was already on Britain’s shores.
The Prudential Regulation Authority established the Financial Policy Committee in 2012 in response to the financial crisis. The FPC is one of several new statutory committees created by the Financial Services Act of 2012. These work together to thwart future economic problems and reduce their impacts.
The FPC typically has thirteen members. These include five external members chosen for outstanding professional experience and financial expertise. The members meet quarterly in March, June, September, and November. The FPC releases public records of these meetings that economists, investors, and other interested parties can review.
Here are some of the positions on this team of thirteen:
The FPC uses its powers and tools to identify, monitor, and take action to remove or reduce risks to the financial system. In doing so, it aims to strengthen the country’s ability to weather new financial crises caused by wars, public health crises and other risks. The FPC also supports the Prudential Regulation Authority’s objective to promote the safety and soundness of individual firms.
The FPC has a flexible approach to meeting its objectives. It has the authority to carry out the following actions:
The FPC focuses most of its resources on commercial activity, such as monitoring the effects of Brexit on the UK economy. However, its actions directly affect consumers too. For example, it can set regulations determining the minimum requirements for securing a mortgage. Similarly, it can restrict banks from providing too many loans to borrowers with small down payments.
In addition, the FPC liaises with the PRA to conduct annual stress tests. The two organizations work together to design and administer these tests to top UK banks. It forces banks to determine how well they can handle hypothetical economic crises. Banks that fail may receive recommendations on changes they should make to improve their financial stability and long-term profitability.
The FPC benefits individuals, businesses, and the economy as a whole. These are some of the most important advantages to keep in mind:
The FPC and other regulatory agencies review financial records when determining compliance and investigating risks. These include all data related to commercial activity or transactions, such as communication records. Failure to produce these records could lead to further investigations and fines.
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