Which regulatory authority focuses on the safety and soundness of firms?

The correct choice addresses the specific focus of the Prudential Regulation Authority (PRA), which is primarily concerned with the safety and soundness of financial firms, particularly banks, insurers, and investment firms. The PRA’s role is to promote the financial stability of these firms, ensuring that they operate in a safe manner and are capable of withstanding financial stresses. This involves setting capital and liquidity requirements, conducting stress testing, and overseeing the governance of these organizations.

In contrast, the Financial Conduct Authority (FCA) seeks to protect consumers and ensure competition in the financial markets, prioritizing conduct and consumer protection over the stability of individual firms. The Financial Ombudsman Service (FOS) serves as a dispute resolution entity between consumers and financial services firms, addressing complaints but not focusing on the stability of the firms themselves. The Bank of England, while overarching in its role for monetary policy and financial stability, delegates specific prudential regulation responsibilities to the PRA. This delineation of responsibilities distinctly positions the PRA as the authority focused on the soundness and safety of firms.