financial market regulation

Question 1

what does the FPC do

Answer 1

financial policy committee
-**macro prudential regulators
- their role is to monitor the entire financial sector, and protect against SYSTEMATIC RISK

-they also can advice the PRA and FCA in tackiling finanical stability issues- to avoid SR
such as advising advising FCA encourage competition

• have a policy prepared and enact if SR did occur e.g. providing bank bailouts

-produce stress tests- as of 2017 2 anually
worst case scinario to test if banks are okay to deal with shock and if they ahev enough cash/ strong enough liquidity position to off set lost loans

• providing emergency liquiidity through liquidiity assurance scheme/ BOE protect against SR

Question 2

what do the PRA do

Answer 2

microprudential regulators

aim to maintain stability of individual banks within UK

ensure banks arent taking too much risk that could destabalize financial sector

set industry standards e.g. specifting ratios and reserve requirements that will create stability- capital ratios, liquidity

limiy threat of bank failure

ensure policy holders are protected

Question 3

what is the FCA

Answer 3

financial conduct authority
doesnt report to BOE- just treasuray- run by governemnt

-micropredential regulators
their aim is to protect consumers and confidence in financial institiutions/ products

-protect public interest by….
superviding conduct of firms
ensure legal activiity- no collusions of IR/ ER or market rigging occur

• ensuring competition occurs to benefit consumers, cheaper/ better deals

ban selling of financial products against interest of consumers e.g. PPI scandal- insutsnce

• banning miseading adverts of financial products e.g. loan sharks