At its meeting on 19 June 2018, the Financial Policy Committee (FPC):
- Continued to judge that, apart from those related to Brexit, domestic risks remained standard overall. In recent months there had been some reduction in domestic risk appetite, although it remained strong. It agreed that risks from global vulnerabilities remained material and had increased.
- Maintained the UK countercyclical capital buffer (CCyB) rate at 1%. It would conduct as normal a comprehensive assessment of the resilience of the UK banking system in the 2018 stress test and review the adequacy of the 1% CCyB rate. It continued to judge that the UK banking system could support the real economy through a disorderly Brexit.
- Continued to monitor preparations to mitigate disruption to financial services that could arise from Brexit. It judged that progress had been made but that material risks remained. The biggest remaining risks of disruption were where action was needed by both UK and EU authorities, such as ensuring the continuity of existing derivative contracts. As yet the EU had not indicated a solution analogous to a temporary permissions regime. The FPC welcomed the establishment in April of a technical working group, chaired by the European Central Bank and Bank of England, on risk management in the area of financial services in the period around 30 March 2019.
- Reiterated that, irrespective of the particular form of the UK’s future relationship with the EU, and consistent with its statutory responsibility, the FPC would remain committed to the implementation of robust prudential standards in the UK. This would require maintaining a level of resilience that was at least as great as that currently planned, which itself exceeded that required by international baseline standards.
- Agreed to set standards for how quickly critical financial companies must be able to restore vital services following a cyber attack. Working with others, especially the National Cyber Security Centre, the Bank would test that firms would be able to meet the FPC’s standard for recovering services.
- Agreed that continued reliance of financial markets on Libor posed a risk to financial stability that could be reduced only through a transition to alternative rates. The FPC would monitor progress and report regularly.
- Agreed to conduct and communicate the outcome of its planned review of its leverage ratio framework once there was further clarity on the finalised implementation of the leverage ratio requirement in EU law and how it might affect UK firms. In the meantime, it supported the Prudential Regulation Authority’s plans to consult on implementing leverage ratio requirements in parallel with the introduction of risk weighted requirements for systemic ring-fenced bank subgroups and large building societies subject to a systemic risk buffer from 2019.
Record of the Financial Policy Committee meeting held on 19 June 2018