What is the main scope of the Financial Policy Committee (FPC)?

• A. Micro-prudential regulation of individual institutions.
• B. Macro-prudential regulation to ensure the stability and resilience of the financial system.
• C. Consumer protection in retail markets only.
• D. Regulation of market conduct.

Answer: (B)

The Financial Policy Committee focuses on macro-prudential regulation to protect the stability and resilience of the financial system as a whole. Macro-prudential work looks at risks that can affect many institutions and markets at once—like a credit boom, liquidity stress, or complex interconnections between banks—and uses tools across the system (such as capital buffers and liquidity requirements) to dampen those risks. It operates at the level of the Bank of England and coordinates with the PRA and FCA, but it isn’t about regulating any single firm. In contrast, micro-prudential regulation targets individual institutions, while consumer protection and market conduct fall under the FCA. So the main scope is macro-prudential regulation to ensure systemic stability.