Chapter 1 Flashcards
In the regulatory framework, who sits directly below parliament?
The Chancellor of the Exchequer and the Treasury
What two entities sits below the FPC in the UK regulatory system?
PRA and the FCA
What is the primary function of the BoE? (there are 4)
- Maintain monetary stability
- Oversee financial stability of the UK financial system
- Lender of last resort
- Custodian of the official hold reserves in the UK
Where does the Monetary Policy Committee sit? (MPC)
They sit within the Bank of England
Who is responsible for setting the legislative framework for the financial sector in the UK?
Parliament
Who can be seen as the macro regulator of the UK?
The FPC (FInancial policy committee)
Who oversees the FCA, PRA, and FPC?
Bank of England
What is the purpose of the MPC?
To maintain price stability in the UK which supports price stability and employment
Where does the MPC sit in the regulatory framework?
Within the BoE
What is the inflation target?
2%
How is the inflation target measured?
Measured by the 12 month increase in CPI
Who are the members of the MPC?
The Governor, Three deputy governors, BoE CHief Economics, and four external members appointed directly by the chancellor
How often does the MPC meet?
8 times a year
What is the focus of the FInancial policy Committee (FPC)?
Their focus is on macroeconomic and financial issues that may threatenthe stability of the financial system and economic objectives.
How often does the FPC meet?
At least 4 times during the year
Who is the PRA?
The PRa is the “Prudential Regulation Authority” and they aim to promote the safety and soundness of PRA authorised firms
What is the difference between a FCA regulated firm and a FCA/PRA regulated firm?
A FCA/PRA regulated firm have significant assets on their balance sheet that could pose a systemic risk. Hence they get extra oversight
What are the four main focus areas of the PRA?
- Avoid instability
- Minimise adverse effect the failure of a PRA authorised firm would have upon the stability of the UK financial system.
- Ensuring firms carry on their business in a way that avoids adverse effects on the system.
- Ensures firms maintain sufficient capital and have adequate controls in place.
What are the three pillars of the FCA
Pillar 1 - Proactive supervision for the biggest firms
Pillar 2 - Event driven, reactive supervision of actual or emerging risks
Pillar 3 - Thematic work focusing on risks/issues affecting multiple firms/sectors
What are FCA fixed portfolio firms?
This is a small population of firms regulated by the FCA which require the highest level of supervisory attention. These are companies that either are large, have a large market presence, or have a large customer footprint.
What are FCA flexible portfolio firms?
Comprise the balance (and majority) of FCA regulated firms.
Which pillars are the FCA fixed portfolio firms affected by?
All three
Which pillars are the FCA flexible portfolio firms affected by
Pillar 2 and 3
Is the FCA private or public?
The FCA is a private company limited by guarantee