ACA ICAEW Business, Technology and Finance Practice Exam

A significant responsibility of the Prudential Regulation Authority (PRA) is focused on monitoring the potential harm that firms can cause to the financial system, which in turn promotes the overall soundness of that system. The PRA is tasked with ensuring that banks, building societies, insurers, and investment firms operate in a manner that minimizes risk and enhances their financial stability. This includes assessing firms’ risk management practices and ensuring they have sufficient capital to withstand economic stresses, ultimately aiming to protect consumers and ensure confidence in the banking system.

The other options are not relevant to the PRA's core functions; for example, providing loans to consumers is primarily the role of financial institutions rather than a regulatory body. Issuing currency falls under the responsibilities of the Bank of England, which is separate from the PRA, and trading in capital markets is generally the domain of investment firms and banks, not a regulatory authority.