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Financial Policy Committee (FPC)

The Financial Policy Committee (FPC) is a key component of the UK's financial regulatory framework, operating under the auspices of the Bank of England. It was established in 2013 as part of reforms following the 2008 global financial crisis, with the primary objective of maintaining the stability of the financial system and reducing systemic risks. The FPC oversees the Bank of England's stress tests for major financial institutions to assess their resilience to adverse economic scenarios.

Real-World Examples of FPC Actions

  1. COVID-19 Pandemic (2020):
    • The FPC reduced the Countercyclical Capital Buffer (CCyB) to 0% to ensure banks could continue lending to businesses and households during the economic shock.
    • It worked closely with other regulators to monitor risks arising from the pandemic and supported financial market liquidity.
  2. Rising Interest Rates and Mortgage Market Risks (2023):
    • The FPC has highlighted vulnerabilities in the mortgage market due to rising interest rates, which could increase defaults among highly indebted households.
    • It continues to monitor whether financial institutions are managing these risks appropriately.
  3. Brexit-Related Risks:
    • The FPC worked to mitigate potential financial instability from Brexit, ensuring financial institutions were prepared for various outcomes, such as disruptions in EU-UK trade or changes to regulatory alignment.

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