Shearman & Sterling LLP | FinReg | UK Financial Policy Committee Outlines Steps to Reduce Risks to the UK's Financial Stability
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  • UK Financial Policy Committee Outlines Steps to Reduce Risks to the UK's Financial Stability


    The Bank of England has published a Financial Stability Report, dated June 2018, and a record of the Financial Policy Committee Meeting held on June 19, 2018. The Report sets out the FPC's view of the U.K.'s financial stability, the resilience of the U.K.'s financial system and the risks posed to each of those. Where applicable, the Report also notes the steps that the FPC is taking to address the risks. The record of the meeting provides a summary of issues discussed by the FPC in June.

    The Report states that the 2017 stress test showed that the U.K. banking system is resilient to severe domestic, global and market shocks, including any disorderly exit from the EU. The FPC does not consider that additional capital buffers are necessary at this stage. It is also maintaining the U.K. countercyclical capital buffer (CCyB) rate at 1%. The FPC will conduct a comprehensive assessment of the resilience of the U.K. banking system in the 2018 stress test and review the adequacy of the 1% CCyB rate. The FPC will continue to monitor the potential effects arising from Brexit and notes that its main concern remains the continuity of existing derivatives contracts.

    The FPC is also working on building on the financial system's resilience to cyber attacks by setting standards on how quickly firms must be able to restore vital services after an attack. The BoE will work with the National Cyber Security Centre to stress test firms' ability to meet the FPC's standards.

    The FPC also notes the potential risks to financial stability arising from continued reliance on LIBOR and will monitor progress on establishing alternatives.

    The FPC’s next policy meeting is on October 3, 2018 and the record of that meeting will be published on October 17, 2018.

    View the Financial Stability Report.

    View the record of the FPC meeting.

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