Which body aims to monitor and reduce systemic risks in financial markets?

The Financial Policy Committee (FPC) is specifically designed to monitor and reduce systemic risks in financial markets. It was established in response to the global financial crisis, recognizing the need for a collective approach to address interconnected risks that can destabilize the broader financial system. The FPC operates within the framework of the Bank of England and has a mandate to ensure the stability of the financial system as a whole, which involves assessing various risks—whether from individual banks, financial institutions, or market conditions.

The FPC employs various tools and strategies to identify potential threats to financial stability, such as macroprudential policy measures, which can include setting capital buffers for banks, adjusting lending standards, or even directing actions to mitigate risks within specific sectors of the economy. Its goal is to act proactively to prevent the build-up of systemic risks that could lead to financial crises, ensuring a resilient financial environment.

While other bodies such as the Prudential Regulation Authority and the Financial Conduct Authority also play critical roles in maintaining financial stability, their primary focus is on micro-level regulation and conduct of firms rather than systemic risk assessment at a broader level. The Bank of England plays multiple roles, including monetary policy, but the specific aim of monitoring and reducing systemic risks is distinctly within the purview