Financial Conduct Authority (FCA) UK Regulation Sample Exam

Which body is responsible for identifying and monitoring systemic risks to protect the UK financial system?

1. The Financial Conduct Authority

2. The Prudential Regulation Authority

3. The Financial Policy Committee

4. The Bank of England

The correct answer is: The Financial Policy Committee

The Financial Policy Committee is responsible for identifying and monitoring systemic risks to protect the UK financial system. Established as part of the Bank of England, the Committee's primary role is to assess the potential vulnerabilities within the economy and the financial ecosystem that could pose a threat to the stability of the financial system. It does this by analyzing various economic indicators and trends, and it has the authority to implement measures aimed at mitigating identified risks. This body not only monitors systemic risks but also engages with other regulatory authorities to ensure a cohesive approach to financial stability. By focusing on the macro-prudential framework, the Committee seeks to ensure that potential threats are addressed before they escalate and inflict harm on the financial landscape. The other regulatory bodies and bodies referenced, while important in their roles, do not specifically have the overarching responsibility of monitoring systemic risks in the same way. The FCA primarily focuses on consumer protection and market integrity within individual firms. The Prudential Regulation Authority concentrates on the safety and soundness of banks and other financial institutions. The Bank of England encompasses a broader set of responsibilities that include monetary policy and operational stability, but it is the Financial Policy Committee that directly aims to identify and respond to systemic risks in the UK financial system.