Chapter 4🩷 Flashcards
When was the Bank of England founded?
1694
The Bank of England was established to act as the government’s banker and to issue banknotes.
In what year was the Bank of England nationalised?
1946
Nationalisation meant that the government took control of the Bank’s operations.
What significant change occurred for the Bank of England in 1997?
Gained operational independence
This allowed the Bank to make decisions without political interference, particularly regarding monetary policy.
What is the primary commitment of the Bank of England?
Promoting and maintaining a stable and efficient monetary and financial framework
This is essential for contributing to a healthy economy.
What role does the Bank of England play in the UK?
It is the UK’s central bank
The Bank acts as a financial institution responsible for overseeing the monetary system.
True or False: The Bank of England is the only central bank in the world.
False
Many other countries also have their own central banks.
What is the primary responsibility of the Bank of England?
Settling of payments
The Bank of England plays a crucial role in maintaining the financial system’s integrity.
List the four key responsibilities of the Bank of England.
- Settling of payments
- Functioning of UK markets
- Regulation of UK banks and larger financial firms
- Provision of routine and emergency liquidity to the banking system
These responsibilities ensure the stability and efficiency of the financial system.
What are the two core purposes of the Bank of England?
- Monetary stability
- Financial stability
These purposes guide the Bank’s policies and actions.
Define monetary stability as per the Bank of England.
Stable prices and confidence in the currency
This is measured against the Government’s inflation target.
What is the Government’s inflation target set for the Bank of England?
2% CPI
CPI stands for Consumer Price Index, which is a key measure of inflation.
How does the Bank of England achieve monetary stability?
By making decisions on interest rates monthly
These decisions are taken by the Monetary Policy Committee.
What is one key function of the Bank’s surveillance?
Detecting threats to the financial system
This helps in maintaining financial stability.
What actions does the Bank of England take to reduce threats to financial stability?
Strengthening infrastructure and acting as the lender of last resort
This includes operations both at home and abroad.
True or False: The Bank of England only focuses on monetary stability.
False
The Bank also prioritizes financial stability.
Fill in the blank: The Bank of England provides _______ to the banking system.
routine and emergency liquidity
This is essential for maintaining trust in the financial system.
What is the primary objective of the Financial Policy Committee (FPC)?
Identifying, monitoring and taking action to remove or reduce systemic risks
This objective aims to protect and enhance the resilience of the UK financial system.
When was the Financial Policy Committee (FPC) established?
1 April 2013
The FPC was established at the Bank of England.
What is the secondary objective of the FPC?
To support the economic policy of the Government
This objective complements its primary focus on systemic risks.
Who are the members of the Financial Policy Committee (FPC)?
Representatives from HM Treasury, the Bank of England, the PRA and FCA
This diverse membership helps incorporate various perspectives in financial policy.
What does the FPC publish to communicate its activities?
A record of its formal policy meetings
This transparency helps stakeholders understand the FPC’s decision-making process.
What report is the FPC responsible for producing bi-annually?
Financial Stability Report
This report assesses the resilience of the UK financial system.
What is the PRA responsible for?
Prudential regulation and supervision of banks, building societies, credit unions, insurers and major investment firms.
What is dual regulation?
The PRA works alongside the FCA which creates twin peaks regulatory structure in the UK
