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<p><em>The Financial Policy Committee (FPC) of the Bank of England was set up to identify,
monitor and take action to remove or reduce systemic risks with a view to protecting
and enhancing the resilience of the UK financial system as part of the new financial
regulatory framework legislated for under The Financial Services Act 2012. The FPC
set out its most recent assessment of financial stability risks, including from the
sterling bond market, in its March 2019 Policy Summary, in which it noted that post-crisis
reforms have made dealers, on which some markets rely, more resilient, reducing the
probability that market-making losses could lead to their distress or failure. In
addition, the FPC noted that during the more recent period of volatility at the end
of 2018, pension funds and insurers had acted as net buyers of sterling corporate
bonds. Notwithstanding this, new business models mean that liquidity conditions in
corporate debt markets could change quickly in event of stress.</em> <em>However,
overall the FPC judged that markets had proved able to function effectively through
volatile periods, and the strength of the core financial system, including banks,
dealers and insurance companies, would support the functioning of markets on which
the economy relied.</em></p>
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