What is the role of the Financial Policy Committee (FPC)?

The Financial Policy Committee (FPC) plays a crucial role in maintaining the stability of the UK financial system by identifying, monitoring, and taking action to mitigate systemic risks. Systemic risks are potential threats that can have widespread economic implications, affecting not just individual institutions but also the entire financial system. The FPC conducts assessments of the financial sector and the wider economy to pinpoint vulnerabilities that may lead to financial crises.

This proactive stance enables the FPC to take necessary measures, such as recommending changes in policy, adjusting capital requirements for banks, or proposing measures to the government to strengthen the financial system's resilience. By focusing on systemic risks rather than on individual institutions or particular market aspects, the FPC aims to ensure that the financial system remains robust and capable of absorbing shocks, thus protecting the overall economy and consumers.

The other options presented do not accurately depict the role of the FPC. Regulating interest rates is primarily the responsibility of the Monetary Policy Committee (MPC) of the Bank of England. Setting standards for financial education falls outside the FPC's mandate and is generally not a direct function of financial regulatory bodies. Supervising banking operations directly is typically the domain of the Prudential Regulation Authority (PRA) and other supervisory agencies rather than the