The Bank of England has two Core Purposes determined by Court as part of its role in setting the Bank's objectives and strategy.
The Core Purposes mean that the Bank exists to ensure monetary stability and to protect and enhance the stability of the financial system.
Core Purpose 1: Monetary Stability
The Bank’s monetary policy objective is to deliver price stability and, subject to that, to support the Government’s economic objectives including those for growth and employment. Monetary stability means stable prices and confidence in the currency. Stable prices are defined by the Government's inflation target, which the Bank seeks to meet through the decisions delegated to the Monetary Policy Committee, explaining those decisions transparently and implementing them effectively in the money markets.
The remit of the Monetary Policy Committee including definition of the inflation target is re-confirmed each year by the Chancellor.
Low and stable medium-term inflation is an essential pre-requisite for economic prosperity.
Core Purpose 2: Financial Stability
Financial stability requires an efficient flow of funds in the economy and confidence in financial institutions.
This is pursued through:
- the Bank’s financial operations, including as lender of last resort;
- decisions of the Financial Policy Committee;
- prudential regulation of financial institutions by the PRA;
- the Bank’s role as resolution authority; and
- Bank oversight and regulation of key payment, clearing and settlement infrastructure.
The Financial Policy Committee (FPC) takes action against systemic risks to protect and enhance the resilience of the UK financial system. The Committee has a secondary objective to support the economic policy of the Government.
The Prudential Regulation Authority (PRA) is responsible for the supervision of around 1,700 banks, building societies, credit unions, insurers and major investment firms. The PRA has a general objective to promote the safety and soundness of these firms and – specifically for insurers – contributes to the protection of policyholders.