Macroprudential tools available to the Financial Policy Committee
Macroprudential tools available to the Financial Policy Committee

The following Financial Services practice note provides comprehensive and up to date legal information covering:

  • Macroprudential tools available to the Financial Policy Committee
  • How will the FPC carry out its macroprudential regulation of the UK financial system?
  • Macroprudential tools
  • Countercyclical capital buffer
  • Sectoral capital requirements
  • Leverage and ratio
  • Powers of Direction
  • Powers of Recommendation
  • Interaction with EU and the powers of the FPC

BREXIT: 11pm (GMT) on 31 December 2020 (‘IP completion day’) marked the end of the Brexit transition/implementation period entered into following the UK’s withdrawal from the EU. Following IP completion day, key transitional arrangements come to an end and significant changes begin to take effect across the UK’s legal regime. This document contains guidance on subjects impacted by these changes. Before continuing your research, see: Brexit and financial services: materials on the post-Brexit UK/EU regulatory regime.

The Financial Policy Committee (FPC) became responsible for macroprudential regulation in the UK on 1 April 2013. Macroprudential regulation considers the stability of the financial system as a whole, so the FPC will consider the collective behaviour of all financial firms.

How will the FPC carry out its macroprudential regulation of the UK financial system?

Under the Bank of England Act 1998 (BEA 1998), as amended by the Financial Services Act 2012 (FSA 2012), the Bank of England (BoE) has a statutory objective to protect and enhance the stability of the financial system in the UK. As the FPC is a subsidiary of the BoE, the FPC is tasked with helping the BoE to meet that objective. The FPC has various categories of power to facilitate that:

  1. a power of 'Direction' to the Financial Conduct Authority (FCA) and Prudential Regulation Authority (PRA)

  2. a power of 'Recommendation' to the FCA and PRA, and

  3. a Recommendation

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