Chartered Institute For Securities And Investment (CISI) Level 3 Practice Exam

Which statement correctly describes the two policy instruments the FPC can use to influence the FCA and PRA?

Power of directions and Power of recommendation The two instruments are financial penalties and public admonitions Power of directions and binding mediation Only advisory guidance notes

Correct Answer:

Power of directions and binding mediation

Explanation:

The FPC has two formal ways to influence the FCA and PRA: issuing directions and using binding mediation. Directions are binding orders the FPC can give to the FCA and PRA to require them to take, or refrain from, actions to address financial stability risks. If there’s a disagreement between the FPC and the regulators, binding mediation provides a mechanism to reach a decision that both must follow. Other options describe tools that the FPC does not have—recommendations aren’t binding, penalties are not a FPC instrument, and relying only on advisory notes would not exert mandatory influence. So the combination of directions and binding mediation best fits how the FPC can steer the regulators.

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