The Bank of England is responsible for making sure the financial system is safe and sound, providing critical services to the real economy in good times and bad. The economy is only healthy if people have confidence in financial institutions, markets and infrastructure.
Our Financial Policy Committee (FPC) identifies and monitors risks in the financial system, and takes action to reduce or remove them where necessary. We publish an assessment of these threats and what we are doing to make sure the system in resilient to them twice a year in our Financial Stability Report.
We also maintain financial stability in the UK in the following ways:
Confidence in the currency
We produce high-quality banknotes that are difficult to forge, so that people can be confident that the money in their wallet is genuine.
Lender and market maker of last resort
We can offer possible liquidity support to financial institutions which are struggling to secure access to sufficient cashflow, potentially putting them in danger of collapse. We don’t, however, offer financial support to firms that are in danger of insolvency. Instead, we manage failed financial institutions through our resolution process.
Managing failed financial institutions
We use a process called resolution to intervene in and manage failed financial firms to make sure the impact on the economy is kept to a minimum.
Watch our video about what happens when a bank fails.
Regulating and supervising financial firms
Our Prudential Regulation Authority (PRA) supervises around 1,700 banks, building societies, credit unions, insurers and major investment firms. It sets standards and policies that these firms are expected to follow, and supervises their activities for any risks.
The PRA’s goals are to maintain:
- a strong and stable banking system with no taxpayers’ money spent on bailing out the financial institutions we supervise
- a resilient insurance sector which does not pass risks back to customers.
We also supervise financial market infrastructures, of which there are three main types:
- payment systems – systems used to settle financial transactions between banks
- securities settlement systems – systems used to hold and transfer securities
- clearing houses – financial institutions which provide clearing and settlement services for derivatives and securities transactions.