The economy is only healthy if people have confidence in financial institutions, markets and infrastructure. We play an important role in maintaining financial stability, which we do through a number of key mechanisms, policies and frameworks, set out below.
The Bank of England sets out its strategy for maintaining Financial Stability at least every three years.
The Bank of England’s Financial Policy Committee (FPC) identifies, monitors and takes action to remove or reduce systemic risks with a view to protecting and enhancing the resilience of the UK financial system. The FPC also has a secondary objective to support the economic policy of the Government.
The FPC also gets a remit letter, typically annually, from the Chancellor. The Governor, on behalf of the FPC, sends a formal response to the Chancellor’s letter.
The FPC meets typically four times a year.
The FPC’s decisions are set out in records of their meeting, which are published after each meeting, as well as in the Financial Stability Report.
The FPC, alongside the Prudential Regulation Committee (PRC), contributes to the design and calibration of the Bank’s stress testing framework. Stress tests allow the FPC and the PRC to assess banks’ resilience and make sure they have enough capital to withstand shocks, and to support the economy if a stress does materialise.
The FPC has two sets of powers – powers of direction and power of recommendation. The FPC has the power to direct regulators to take action on a number of specific policy tools. In addition, the FPC can make recommendations to anyone to reduce risks to financial stability.
The FPC publishes policy statements for each of its powers of direction to explain how it plans to use them and why.
The countercyclical capital buffer (CCyB) is a tool that enables the FPC to adjust the resilience of the banking system. The FPC increases the CCyB when it judges that risks are building up. This means that banks are required to have an additional cushion of capital with which to absorb potential losses, enhancing their resilience and contributing to a stable financial system.
Latest announced UK CCyB rate
1.00%
With binding effect from 28 November 2018
| Date announced | CCyB rate | Implementation date |
|---|---|---|
| 27 June 2017 | 0.50% | 27 June 2018 |
| 28 November 2017 | 1.00% | 28 November 2018 |
A cornerstone of the international CCyB framework is that when lending to borrowers in another country, foreign firms should face the same CCyB rate as the domestic firms in that country.
The following table shows all positive CCyB rates recognised or set by the FPC on foreign exposures for UK firms in specific countries.
| Country | Current CCyB rate | Implementation date | Pending CCyB rate | Implementation date |
|---|---|---|---|---|
| Lithuania | 0.00% | 30 Jun 2015 | 0.50% | 31 Dec 2018 |
| 1.00% | 30 Jun 2019 | |||
| France | 0.00% | 30 Dec 2015 | 0.25% | 1 Jul 2019 |
| Bulgaria | 0.00% | 1 Jan 2016 | 0.50% | 1 Oct 2019 |
| Denmark | 0.00% | 1 Jan 2016 | 0.50% | 31 Mar 2019 |
| 1.00% | 30 Sep 2019 | |||
| Ireland | 0.00% | 1 Jan 2016 | 1.00% | 5 Jul 2019 |
| United States | 0.00% | 24 Oct 2016 | ||
| Sweden | 2.00% | 19 Mar 2017 | 2.50% | 19 Sep 2019 |
| Iceland | 1.25% | 1 Nov 2017 | 1.75% | 15 May 2019 |
| Norway | 2.00% | 31 Dec 2017 | ||
| Hong Kong | 1.875% | 1 Jan 2018 | 2.50% | 1 Jan 2019 |
| Czech Republic | 1.00% | 1 Jul 2018 | 1.25% | 1 Jan 2019 |
| 1.50% | 1 Jul 2019 | |||
| Slovakia | 1.25% | 1 Aug 2018 | 1.50% | 1 Aug 2019 |
The information in this table reflects policy decisions taken on or before 5 December 2018 and published on publically available websites.
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.
Financial market infrastructures, such as payment settlement systems and central counterparties, play a key role in keeping the economy moving. The Bank of England is responsible for overseeing these important services.
We regulate around 1,500 banks, building societies, credit unions, insurers and investment firms to make sure they are safe and sound.
Financial Stability Strategy
