Pt. 3B inserted (1.1.2024 at 1.00 a.m. for the insertion of ss. 30E(1)(c), 30I(2) for specified purposes, 1.1.2025 for the insertion of s. 30E(1)(c) for specified purposes, 1.2.2025 for the insertion of s. 30I(2) so far as not already on force) by Financial Services and Markets Act 2023 (c. 29), ss. 48, 86(3); S.I. 2023/1382, regs. 10(d), 12(b), 13 (with reg. 16(1))

358

Words in s. 9U(3)(d) substituted (30.11.2025) by The Financial Services and Markets Act 2023 (Capital Buffers and Macro-prudential Measures) (Consequential Amendments) Regulations 2025 (S.I. 2025/1023), regs. 1(2), 2

Reserve powers.

Reports.

2A

(1) An objective of the Bank shall be to protect and enhance the stability of the financial system of the United Kingdom (the “Financial Stability Objective”).

(2) In pursuing the Financial Stability Objective the Bank shall aim to work with other relevant bodies (including the Treasury and the Financial Conduct Authority).

(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2B

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2C

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2A

A person may not be appointed as a member of the Committee under section 13(2)(c) more than twice.

Financial Stability Committee: supplemental

PART 1A — Financial Stability

Financial stability strategy of the Bank

Consequential amendments.

9A

(1) The court of directors must—

(a) determine the Bank's strategy in relation to the Financial Stability Objective (its “financial stability strategy”), and

(b) from time to time review, and if necessary revise, the strategy.

(2) Before determining or revising the Bank's financial stability strategy, the court of directors must consult about a draft of the strategy or of the revisions—

(a) the Financial Policy Committee, and

(b) the Treasury.

(3) The Financial Policy Committee may at any time make recommendations to the court of directors as to the provisions of the Bank's financial stability strategy.

(4) The court of directors must determine the financial stability strategy of the Bank within 6 months of the coming into force of this section.

(5) The court of directors must carry out and complete a review of the Bank's financial stability strategy before the end of each relevant period.

(6) The relevant period is 3 years beginning with the date on which the previous review was completed, except that in the case of the first review the relevant period is the period of 3 years beginning with the date on which the strategy was determined under subsection (4).

(7) The Bank must publish its financial stability strategy.

(8) If the financial stability strategy is revised, the Bank must publish the revised strategy.

(9) Publication under subsection (7) or (8) is to be in such manner as the Bank thinks fit.

Financial Policy Committee of the Bank

9B

(1) There is to be a committee of the Bank (the “ Financial Policy Committee ”) consisting of—

(a) the Governor of the Bank,

(b) the Deputy Governor for financial stability,

(ba) the Deputy Governor for markets and banking,

(bb) the Deputy Governor for monetary policy,

(bc) the Deputy Governor for prudential regulation,

(d) one member appointed by the Governor of the Bank after consultation with the Chancellor of the Exchequer,

(e) 5 members appointed by the Chancellor of the Exchequer, and

(f) a representative of the Treasury.

(2) The member appointed under subsection (1)(d) is to be a person who has executive responsibility within the Bank for the analysis of threats to financial stability.

(3) Before appointing a person under subsection (1)(e), the Chancellor of the Exchequer must—

(a) be satisfied that the person has knowledge or experience which is likely to be relevant to the Committee's functions, and

(b) consider whether the person has any financial or other interests that could substantially affect the functions as member that it would be proper for the person to discharge.

(4) The court of directors of the Bank must keep the procedures followed by the Financial Policy Committee under review.

(5) Schedule 2A has effect with respect to the Financial Policy Committee.

Recommendations resulting from review

9C

(1) The Financial Policy Committee is to exercise its functions with a view to—

(a) contributing to the achievement by the Bank of the Financial Stability Objective, and

(b) subject to that, supporting the economic policy of Her Majesty's Government, including its objectives for growth and employment.

(2) The responsibility of the Committee in relation to the achievement by the Bank of the Financial Stability Objective relates primarily to the identification of, monitoring of, and taking of action to remove or reduce, systemic risks with a view to protecting and enhancing the resilience of the UK financial system.

(3) Those systemic risks include, in particular—

(a) systemic risks attributable to structural features of financial markets, such as connections between financial institutions,

(b) systemic risks attributable to the distribution of risk within the financial sector, and

(4) Subsections (1)(a) and (2) do not require or authorise the Committee to exercise its functions in a way that would in its opinion be likely to have a significant adverse effect on the capacity of the financial sector to contribute to the growth of the UK economy in the medium or long term.

(5) In this Part “ systemic risk ” means a risk to the stability of the UK financial system as a whole or of a significant part of that system.

(6) For the purposes of subsection (5) it is immaterial whether the risk arises in the United Kingdom or elsewhere.

(7) In subsection (3)(c)—

“ credit growth ” means the growth in lending by the financial sector to individuals in the United Kingdom and businesses carried on in the United Kingdom;

“ debt ” means debt owed to the financial sector by individuals in the United Kingdom and businesses carried on in the United Kingdom;

“ leverage ” means the leverage of the financial sector in the United Kingdom.

Specification of matters relevant to economic policy

9D

(1) The Treasury may by notice in writing to the Financial Policy Committee specify for the purposes of section 9C(1)(b) what the economic policy of Her Majesty's Government is to be taken to be.

(2) The Treasury must specify under subsection (1) the matter mentioned there—

(a) before the end of the period of 30 days beginning with the day on which section 9C comes into force, and

(b) at least once in every calendar year following that in which the first notice under that subsection is given.

(3) Where the Treasury give notice under this section they must—

(a) publish the notice in such manner as they think fit, and

(b) lay a copy of it before Parliament.

9E

(1) The Treasury may at any time by notice in writing to the Financial Policy Committee make recommendations to the Committee about—

(a) matters that the Committee should regard as relevant to the Committee's understanding of the Bank's Financial Stability Objective;

(b) the responsibility of the Committee in relation to the achievement of that objective;

(c) the responsibility of the Committee in relation to support for the economic policy of Her Majesty's Government, including its objectives for growth and employment;

(d) matters to which the Committee should have regard in exercising its functions.

(2) The Treasury must make recommendations under subsection (1)(a) or (b) (“recommendations about the objective”)—

(a) before the end of the period of 30 days beginning with the day on which this section comes into force, and

(b) at least once in every calendar year following that in which the first recommendations about the objective are made.

(3) The Committee must respond to any recommendations made to it under subsection (1) by notifying the Treasury, in relation to each recommendation, of one or more of the following—

(a) action that the Committee has taken in accordance with the recommendation;

(b) if or to the extent that the recommendation does not relate to immediate action, the Committee's intention to act in accordance with it;

(c) whether or not the recommendation relates to immediate action, the Committee's reasons for not intending to act in accordance with it.

(4) Notification under subsection (3) must be given or confirmed in writing.

(5) The Treasury must—

(a) publish in such manner as they think fit any notice given under subsection (1) or notification received under subsection (3), and

(b) lay a copy of it before Parliament.

9F

(1) In the exercise of its functions, other than its functions under section 9A(2) or (3), the Financial Policy Committee must have regard to the Bank's financial stability strategy.

(2) In working with the FCA or the PRA or exercising functions in relation to either of them, the Committee must, so far as it is possible to do so while complying with section 9C(1), seek to avoid exercising the Committee's functions in a way that would prejudice—

(a) the advancement by the FCA of any of its operational objectives, or

(b) the advancement by the PRA of any of its objectives.

(3) In the exercise of its functions, the Committee must also have regard to—

(a) the principle that a burden or restriction which is imposed on a person, or on the carrying on of an activity, should be proportionate to the benefits, considered in general terms, which are expected to result from the imposition of that burden or restriction;

(b) the contribution to the achievement by the Bank of the Financial Stability Objective that the Committee can make by disclosing its views about possible systemic risks or disclosing other information about possible systemic risks;

(c) the international obligations of the United Kingdom, particularly where relevant to the exercise of the powers of the Committee in relation to the FCA or the PRA.

9G

(1) The functions of the Financial Policy Committee are—

(a) monitoring the stability of the UK financial system with a view to identifying and assessing systemic risks;

(b) giving directions under section 9H;

(d) preparing financial stability reports under section 9W.

(2) The court of directors may, with the consent of the Treasury, arrange for specified functions of the Bank to be discharged by the Financial Policy Committee.

Directions by Financial Policy Committee

Directions to FCA or PRA requiring macro-prudential measures

9H

(1) The Financial Policy Committee may give a direction to the FCA or the PRA (“the regulator”) requiring the regulator to exercise its functions so as to ensure the implementation, by or in relation to a specified class of regulated persons, of a macro-prudential measure described in the direction.

(2) “ Regulated person ” means—

(a) in relation to the FCA—

(i) an authorised person within the meaning of FSMA 2000, or

(ii) a recognised investment exchange within the meaning of that Act, ...

(iii) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(b) in relation to the PRA—

(i) a PRA-authorised person within the meaning of that Act, or

(ii) a financial holding company or mixed financial holding company that is approved under section 192R of that Act or designated under section 192T(2)(c) of that Act.

(3) “ Macro-prudential measure ” is to be read in accordance with section 9L.

(4) The direction may relate to all regulated persons or to regulated persons of a specified description, but may not relate to a specified regulated person.

(5) The direction—

(a) may refer to the opinion of the regulator or require or authorise the exercise of a discretion by the regulator;

(b) may be expressed to remain in force for a specified period or until revoked.

(6) The direction may not require its provisions to be implemented by specified means or within a specified period, but may include recommendations as to the means to be used and the timing of implementation.

(7) A recommendation made under subsection (6) may be expressed to be one to which section 9Q(3) (duty to comply or explain) applies.

(8) The direction may not require the regulator to do anything that it has no power to do, but the existence of the direction is relevant to the exercise of any discretion conferred on the regulator.

(9) The direction may specify particular matters to which the regulator is or is not to have regard in complying with the direction, but those matters must be specified in relation to all regulated persons or a class of regulated person rather than a specified regulated person.

(10) The direction may refer to a publication issued by the FCA, the PRA, another body in the United Kingdom or an international organisation, as the publication has effect from time to time.

(11) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(12) In this section—

“the Capital Requirements Regulation” means Regulation (EU) No. 575/2013 of the European Parliament and of the Council of 26 June 2013 on prudential requirements for credit institutions and investment firms;

“financial holding company” has the meaning given in Article 4(1)(20) of the Capital Requirements Regulation;

“mixed financial holding company” has the meaning given in Article 4(1)(21) of the Capital Requirements Regulation.

Compliance with directions under section 9H

9I

(1) The regulator must comply with a direction given to it under section 9H as soon as reasonably practicable.

(1A) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(2) An order under section 9L may, in relation to cases where the regulator is complying with a direction under section 9H, exclude or modify any procedural requirement that would otherwise apply under FSMA 2000 in relation to the exercise by the regulator of its functions in pursuance of the direction.

(3) The regulator to which a direction under section 9H is given must give the Financial Policy Committee one or more reports on how it is complying or has complied with the direction.

(4) The Financial Policy Committee may give directions to the regulator specifying the times by which reports required by subsection (3) must be given to the Committee.

(4A) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(5) “ Regulator ” has the same meaning as in section 9H.

Revocation of directions under section 9H

9J

(1) The Financial Policy Committee may at any time by notice to the regulator revoke a direction under section 9H.

(2) A direction under section 9H is to be taken to be revoked if the measure to which it relates ceases to be a macro-prudential measure, but this is subject to any provision made under section 9L(4)(e).

(3) The revocation of a direction under section 9H does not affect the validity of anything previously done in accordance with it.

(4) “ Regulator ” has the same meaning as in section 9H.

Further provisions about directions under section 9H

9K

(1) Each of the following must be in writing—

(a) a direction under section 9H;

(b) a notice revoking such a direction;

(2) The Financial Policy Committee must give the Treasury a copy of any direction under section 9H or any notice revoking such a direction.

(3) The Treasury may, if they think fit, lay before Parliament a copy of a direction under section 9H or a notice revoking such a direction.

(4) Where a direction under section 9H, or a notice revoking such a direction, is included in a record published under section 9U, the Treasury must, if they have not already done so, lay before Parliament a copy of the direction or notice in the form in which it is published in the record.

9L

(1) For the purposes of section 9H a “macro-prudential measure” is a measure prescribed by the Treasury by order.

(2) Before making an order under this section, the Treasury must—

(a) consult the Financial Policy Committee, or

(b) if the Treasury consider that the delay involved in consulting the Committee would be prejudicial to the stability of the UK financial system, consult the Governor of the Bank.

(3) In prescribing a measure, the order must specify whether the measure is prescribed in relation to the FCA, the PRA, or both.

(4) An order under this section—

(a) may make different provision for different cases;

(b) may confer a discretion on the Financial Policy Committee, the FCA or the PRA;

(d) may refer to a publication issued by the FCA, the PRA, another body in the United Kingdom or an international organisation, as the publication has effect from time to time;

(e) may contain transitional provisions and savings relating to the coming into force of any provision of the order or to the ceasing to be in force of any temporary provision made by the order.

Statements of policy by Financial Policy Committee

9M

(1) In relation to each macro-prudential measure prescribed under section 9L, the Financial Policy Committee must prepare and maintain a written statement of the general policy that it proposes to follow in relation to the exercise of its power of direction under section 9H so far as it relates to that measure.

(2) The Committee may at any time alter or replace a statement maintained under this section.

(3) The Bank must publish each statement maintained under this section.

(4) Publication is to be in such manner as the Bank thinks fit.

(5) Nothing in this section is to be regarded as preventing the Financial Policy Committee from exercising its power of direction under section 9H in relation to a macro-prudential measure, where it considers it necessary to do so by reason of urgency, before it has prepared a statement under this section in relation to that measure.

9N

(1) Except as provided by subsection (2), an order under section 9L is not to be made unless a draft of the order has been laid before and approved by resolution of each House of Parliament.

(2) An order under section 9L may be made without a draft having been laid and approved as mentioned in subsection (1) if the order contains a statement that the Treasury are of the opinion that, by reason of urgency, it is necessary to make the order without a draft being so laid and approved.

(3) An order under section 9L made in accordance with subsection (2)—

(a) must be laid before Parliament after being made, and

(b) ceases to have effect at the end of the relevant period unless before the end of that period the order is approved by a resolution of each House of Parliament (but without affecting anything done under the order or the power to make a new order).

(4) The “relevant period” is a period of 28 days beginning with the day on which the order is made.

(5) In reckoning the relevant period no account is to be taken of any time during which Parliament is dissolved or prorogued or during which either House is adjourned for more than 4 days.

Recommendations by Financial Policy Committee

9O

(1) The Financial Policy Committee may make recommendations within the Bank.

(2) The recommendations may, in particular, relate to—

(a) the provision by the Bank of financial assistance to financial institutions;

(b) the exercise by the Bank of its functions in relation to payment systems, settlement systems , clearing houses and central securities depositories.

(3) The Committee may not make recommendations about—

(a) the provision by the Bank of financial assistance in relation to a particular financial institution, or

(b) the exercise by the Bank of its powers under Parts 1 to 3 of the Banking Act 2009 or Schedule 11 to the Financial Services and Markets Act 2023 in relation to a particular institution.

(4) The recommendations must be made or confirmed in writing.

(5) Recommendations by the Committee to the PRA are to be made under section 9Q (and not under this section).

9P

(1) The Financial Policy Committee may make recommendations to the Treasury.

(2) The recommendations may, in particular, relate to the exercise by the Treasury of their power to make orders under—

(a) section 9L (macro-prudential measures),

(b) section 22(1) or (1A) of FSMA 2000 (regulated activities),

(d) section 137D(1)(b) of that Act (purposes for which FCA may make product intervention rules), or

(e) section 165A(2)(d) of that Act (additional persons who may be required by PRA to provide information).

(3) The recommendations must be made or confirmed in writing.

(4) The Committee may make a recommendation under subsection (2)(e) only if it considers that the exercise by the Treasury of their power to make an order under section 165A(2)(d) of FSMA 2000 in the manner proposed is desirable for the purposes of the exercise by the Committee of its functions.

(5) Before giving a recommendation under subsection (2)(e), the Committee must consult the Treasury.

9Q

(1) The Financial Policy Committee may make recommendations to the FCA and the PRA about the exercise of their respective functions.

(2) The recommendations may relate to all regulated persons or to regulated persons of a specified description, but may not relate to the exercise of the functions of the FCA or the PRA in relation to a specified regulated person.

(3) If the recommendations are expressed to be recommendations to which this subsection applies, the body to which they are made must as soon as reasonably practicable—

(a) act in accordance with the recommendations, or

(b) if to any extent it does not, notify the Committee of the extent to which it has not acted in accordance with the recommendations and of the reasons for its decision.

(4) The recommendations, and any notification under subsection (3)(b), must be made or confirmed in writing.

(4A) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(4B) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(4C) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(5) “ Regulated person ” has the same meaning as in section 9H.

Recommendations to other persons

9R

(1) The Financial Policy Committee may make recommendations to persons other than those mentioned in sections 9O to 9Q.

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