R01 PRA, FPC and FCA: roles and tools: free practice questions

1. Question 1 of 5

   What are the PRA's two secondary objectives?

   Option A: Facilitating competition, and the UK's competitiveness and growthOption B: Protecting consumers and enhancing the integrity of the marketsOption C: Maintaining monetary stability and wider financial stabilityOption D: Reducing financial crime and protecting insurance policyholders

   Show answer

   The answer is A: Facilitating competition, and the UK's competitiveness and growth

   The PRA's primary objectives are safety and soundness (plus policyholder protection for insurers). Its secondary objectives are to facilitate effective competition and, since 2023, the UK economy's international competitiveness and growth.

   Why the other options are wrong

   B

   Consumer protection and market integrity are FCA operational objectives.

   C

   Monetary and financial stability are the Bank of England's core purposes.

   D

   Policyholder protection is a primary insurance objective; financial crime is an FCA concern.

2. Question 2 of 5

   Which three characteristics describe the PRA's approach to regulation and supervision?

   Option A: Judgement-based, forward-looking and risk-focusedOption B: Consumer-led, competitive and transparentOption C: Rules-based, reactive and complaint-ledOption D: Zero-failure, prescriptive and backward-looking

   Show answer

   The answer is A: Judgement-based, forward-looking and risk-focused

   The PRA uses judgement on safety and soundness, looks at current and plausible future risks, and focuses on the firms and issues posing greatest risk to stability.

   Why the other options are wrong

   B

   These describe consumer conduct concerns, not the PRA's prudential approach.

   C

   The PRA's approach is judgement-based and forward-looking, not rules-based and reactive.

   D

   The PRA explicitly doesn't run a zero-failure regime.

3. Question 3 of 5

   Which is an example of a macro-prudential tool the FPC can use?

   Option A: Setting the level of Bank Rate at each meetingOption B: Fining an individual adviser who has mis-sold productsOption C: Authorising newly formed building societies to tradeOption D: Setting countercyclical capital buffers for banks

   Show answer

   The answer is D: Setting countercyclical capital buffers for banks

   The FPC's macro-prudential tools include countercyclical capital buffers, variable risk weights for particular sectors and leverage limits, aimed at system-wide risk.

   Why the other options are wrong

   A

   Bank Rate is set by the MPC.

   B

   Fining advisers is FCA enforcement against individuals.

   C

   Authorisation of deposit takers is done by the PRA.

4. Question 4 of 5

   Which statement about the Financial Policy Committee is correct?

   Option A: It publishes a Financial Stability Report once every five yearsOption B: It is chaired by the Governor and can reject Treasury recommendationsOption C: It is chaired by the Chancellor and must follow every Treasury recommendationOption D: It has five members, all from the FCA

   Show answer

   The answer is B: It is chaired by the Governor and can reject Treasury recommendations

   The FPC has 13 members, chaired by the Governor, including the FCA's chief executive and five external members, plus a non-voting Treasury member. It responds to the Treasury's remit but can reject recommendations, and publishes a Financial Stability Report twice a year.

   Why the other options are wrong

   A

   The Financial Stability Report is published twice a year.

   C

   It's chaired by the Governor and may reject Treasury recommendations.

   D

   It has 13 members drawn from the Bank, the FCA and external experts.

5. Question 5 of 5

   What power did the Financial Services Act 2012 give the FCA to support a more proactive approach?

   Option A: A power to guarantee the returns on retail investmentsOption B: A power to cap the interest rates on all consumer creditOption C: A power to ban or restrict financial products quicklyOption D: A power to appoint the Governor of the Bank of England

   Show answer

   The answer is C: A power to ban or restrict financial products quickly

   The FCA was given a product intervention power to act quickly to ban or restrict products, plus powers to publish warning notices and act against misleading financial promotions.

   Why the other options are wrong

   A

   The FCA can't guarantee returns.

   B

   The FCA doesn't set interest rates.

   D

   The Governor is appointed through the Crown on the Government's recommendation, not by the FCA.

R0 Exam Prep is an independent revision tool. It is not produced, endorsed by or affiliated with the Chartered Insurance Institute (CII). Questions and explanations are original. Use it alongside the official study text. About R0 Exam Prep