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Home > Financial Stability > Policy statements

Policy statements

There is a statutory requirement for the Financial Policy Committee to prepare and maintain a general statement of policy for the powers of Direction it is given under legislation. These Policy Statements describe the tools, the likely impact of using them on financial stability and growth, and the circumstances in which the FPC might expect to use each tool. They also describe the core indicators the FPC will routinely review to help inform its judgements.

Policy Statements on the countercyclical capital buffer and sectoral capital requirements

Her Majesty’s Government has made the FPC responsible for setting the countercyclical capital buffer in the United Kingdom.  In addition, it has given the FPC Direction powers over sectoral capital requirements, which can be set in relation to exposures to specific sectors judged to pose a risk to the financial system as a whole. 

In April 2016, the FPC updated its Policy Statement describing its approach to setting the countercyclical capital buffer – see ‘The Financial Policy Committee’s approach to setting the countercyclical capital buffer’.  This replaces those sections of the Committee’s previous Policy Statement, published in January 2014, which related to the countercyclical capital buffer.

The FPC’s approach to setting sectoral capital requirements is set out in the relevant sections of its January 2014 Policy Statement, ‘The Financial Policy Committee’s powers to supplement capital requirements: A Policy Statement’.

Policy Statements on housing and leverage ratio tools

In April 2015, Her Majesty’s Government gave the FPC new powers of Direction over the Prudential Regulation Authority (PRA) and Financial Conduct Authority (FCA) in relation to loan to value and debt to income limits in respect of owner-occupied lending, and over the PRA in relation to leverage ratio tools.
The FPC published two Policy Statements for housing and leverage ratio tools in July 2015. In December 2015, Her Majesty’s Government consulted on its intention to take forward legislation to grant the FPC new powers of Direction over the PRA and FCA in relation to loan to value and interest coverage ratio limits in respect of buy-to-let lending. The FPC published an update of its Housing Policy Statement, with material covering these proposed new powers, in draft form, in November 2016 in time to be considered alongside Parliament’s scrutiny of the associated secondary legislation.

Key Resources

The Financial Policy Committee's powers over housing policy instruments
Draft Policy Statement - 18 November 2016
This is a draft update to the FPC’s existing Policy Statement on housing tools. It has been expanded to include material on the FPC’s proposed powers in relation to LTV and ICR limits for the buy-to-let mortgage market. This material has been published in draft form to inform the Parliamentary debate of the proposed legislation necessary to establish these powers.

The Financial Policy Committee’s approach to setting the countercyclical capital buffer
Policy Statement - 5 April 2016
The FPC's powers to supplement capital requirements
Policy Statement - 14 January 2014
The Financial Policy Committee’s powers over housing tools
Policy Statement – 1 July 2015
The Financial Policy Committee’s powers over leverage ratio tools
Policy Statement – 1 July 2015, updated 3 October 2017

Related documents

The Financial Policy Committee's review of the leverage ratio
31 October 2014
Financial Policy Committee statement on housing market powers of Direction from its policy meeting, 26 September 2014
2 October 2014
Letter from the Governor to the Chancellor
Letter from the Chancellor to the Governor
Exchange of letters - 31 October 2014