The Bank of England and the PRA: keeping banks and insurers safe

The Bank of England is the UK's central bank and a publicly owned body¹. It is not a bank you can walk into and open an account with. Its work reaches almost every part of your financial life all the same: it sets the interest rate that shapes what your mortgage and savings pay, it supervises the banks, building societies and insurers you deal with through the Prudential Regulation Authority, it processes the large payments that sit behind buying a house, and it issues the banknotes in your wallet².

Its statutory objective covers two things: monetary stability, meaning stable prices, and financial stability, meaning a financial system that does not collapse³. In practice that means the Bank spends its time on inflation, interest rates and the safety of the firms that hold your money, rather than on serving customers directly. When something goes wrong in the system, for example when cyber-risk affects one of the roughly 1,500 companies it regulates, it works with the Financial Conduct Authority, the Treasury and other authorities to respond⁴.

This page explains what each of those roles means for you as a consumer: how Bank Rate reaches your mortgage and savings, who sits on the committee that sets it, what the PRA does to keep your bank and insurer standing, where the limits on risky mortgage lending came from, how scam reimbursement works on the payment systems the Bank oversees, and how to spot the fraudsters who pretend to be the Bank itself.

What the Bank of England does for you

Most people never deal with the Bank of England directly, but four of its jobs touch everyday money.

The first is setting the interest rate. The Bank states plainly: "for example, we set the interest rate, which impacts the cost of getting a mortgage"². That single rate, Bank Rate, feeds through to mortgage rates, savings rates and the cost of borrowing across the economy.

The second is keeping the financial system standing. The Bank tests whether the largest banks can cope with big losses, including losses on unsecured debt such as credit cards and loans¹⁰. It also publishes monthly statistical data on lending to individuals, with breakdowns by type of lender and product, which is how economists and journalists know how much households are borrowing¹¹.

The third is payments. The Bank processes big payments, including the transfers that sit behind buying a house². When you complete a property purchase, the money often moves through a system the Bank itself operates, called CHAPS, covered later on this page.

The fourth is banknotes. The notes in your wallet are issued by the Bank, and the Bank states that "The money we issue is backed by the Government"¹. That backing is one reason banknotes hold their value even though they are, physically, paper (or polymer).

One thing the Bank is often asked, and answers directly: "as a central bank, we can't go bust"². A commercial bank can fail, which is why deposit protection exists. The central bank cannot, because it sits at the centre of the system rather than competing in it. For more on how the regulators divide the work, see who regulates what.

Bank Rate and how it reaches your mortgage and savings

Bank Rate is the single most important interest rate in the UK, and the Bank is unambiguous about whose job it is: "It is the core interest rate in the UK and it is our job to set it"¹². Every other rate, from mortgage fixes to savings accounts, is priced with reference to it, loosely or tightly depending on the product.

The last few years show how far and how fast it can move. Bank Rate rose from 0.1% in December 2021 to 5.25% in August 2023¹³, a period in which the Bank raised rates 14 consecutive times¹⁴. Measured from January 2022, the Bank increased the rate 13 times from 0.25% to 5.25% between January 2022 and August 2023¹⁵. It then cut twice in 2024, in August and November, bringing the rate down from 5.25% to 4.75%¹⁶. In 2025 the committee lowered rates three times, from 4.75% to 4% by August¹⁷. As of Q2 2026, Bank Rate stands at 3.75%, unchanged at the last four meetings⁵.

What does that mean for you in practice? When Bank Rate rises, borrowing gets more expensive: new mortgages and re-fixes cost more, and variable and tracker rates move up quickly. Savings rates also tend to rise, though not always by the same amount or at the same speed. When Bank Rate falls, the process runs in reverse. The direction of travel matters most to people on variable rates or coming to the end of a fixed deal, because they feel each change soonest. The dedicated guide to Bank Rate, inflation and the UK economy covers the mechanics in more depth.

The Monetary Policy Committee: nine members, eight decisions a year

Bank Rate is not set by one person. It is set by the Monetary Policy Committee (MPC), which the Bank describes as "A group of nine people with a variety of backgrounds"⁵. Five of them are already employees of the Bank, so they are called internal members, and four are people from outside the Bank with relevant knowledge or experience, known as external members³.

The appointments matter for understanding whose judgement is behind each decision. The Chancellor appoints the committee's four external members for a fixed term, and the Governor appoints the Chief Economist after consultation with the Chancellor³. The membership structure is set out in the Bank of England Act 1998, and the decision-making process in the Bank of England and Financial Services Act 2016³.

The committee meets to look at the evidence and make a decision about every six weeks, which works out at eight times a year⁵. Each decision is published, with minutes of the meetings, at midday on the Thursday at the end of the meeting³. Since 2015 the committee's second and final meetings have been recorded, and transcripts are published after an eight-year delay³. That arrangement, and the practice of publishing a full suite of material alongside each decision, follows recommendations made by the 2014 Warsh Review³.

The MPC also has a second tool, quantitative easing (QE), which the Bank has used to stimulate the UK economy since the 2008 financial crisis³. QE works through financial markets rather than through the rates you see on a mortgage quote, so its effects on consumers are indirect.

The 2% inflation target and why rates rise or fall

The Government sets the Bank a target of keeping inflation at 2%³. That target is the anchor for every rate decision: when inflation is above target and expected to stay there, the committee tends to raise rates to cool spending; when inflation is at or below target and the economy is weak, it tends to cut them.

The recent record shows both directions. Consumer price inflation rose sharply from late 2021, then, as the Bank put rates up, gradually reduced to reach the Bank of England's target rate of 2% by June 2024¹⁴. The Bank's own forecast published in December 2024 was for the inflation rate to rise to 2.8% in 2025 before gradually easing back towards 2% in 2027¹⁶. More recently, the Bank was projecting UK inflation to peak at 3.2% in Q4 2026¹⁵.

Why does raising rates lower inflation? Higher rates make borrowing more expensive and saving more attractive, so households and businesses spend less, which eases the pressure pushing prices up. But the effect is not instant, which is why the MPC has to forecast rather than react. It meets about every six weeks to look at the evidence and make a decision¹⁵, basing that decision on the financial state of the UK economy, including inflation, employment figures and consumer confidence²². That delay between a rate change and its effect on prices is why rates sometimes move in ways that seem out of step with today's inflation figure.

The PRA: keeping banks, building societies and insurers safe

The Prudential Regulation Authority (PRA) is part of the Bank of England, and its job is described in one line: "it makes sure firms do business safely and reduce their chances of getting into financial difficulty"²³. "Prudential" means solvency: the PRA checks that banks, building societies, credit unions, insurers and major investment firms hold enough capital and liquidity to absorb losses without failing.

The scale of the job is large. The PRA is responsible for the prudential regulation and supervision of around 1,500 banks, building societies, credit unions, insurers and major investment firms⁶. The Bank's own explainer gives a slightly different figure, saying the PRA supervises about 1,300 financial institutions, including banks and insurance companies²³. The documents differ on the exact count, but both put it in the low thousands, and the figure moves as firms are authorised or exit the market.

The PRA is one half of a two-part system. While the PRA's job is to make sure firms are stable and resilient, the Financial Conduct Authority (FCA) works with them to make sure they treat customers fairly²³. So a bank answers to the PRA on whether it can survive losses, and to the FCA on how it behaves towards you. The PRA also deals with individual firms, while the Financial Policy Committee, another Bank of England body, is responsible for financial stability across the entire economy²³.

For a consumer, the PRA's work connects directly to deposit protection. The Financial Services Compensation Scheme (FSCS) protects eligible deposits, and one condition is that the bank or building society must be authorised by the PRA²⁴. The PRA is also responsible for the deposits and insurance rules that underpin FSCS protection, while the FCA is responsible for rules relating to other activities²⁵. You can check whether a firm is authorised on the FCA Register, and the guide to how UK banks are regulated explains the process in full.

Limits on risky mortgage lending

Beyond supervising individual firms, the Bank sets system-wide rules that shape who can borrow and how much. The Bank's own summary: "For example, we have created rules to limit the riskiest type of mortgage lending"¹⁰.

The best known is the loan-to-income flow limit. Since 2014, mortgage lenders do not extend more than 15% of their total number of new residential mortgages at loan-to-income ratios of 4.5 or above²⁶. In 2015 the Government gave the Bank two new tools to restrict the proportion of risky mortgages that banks take on². In July 2025 the Bank introduced a temporary exemption to the loan-to-income flow limit, saying individual lenders could exceed the 15% limit as long as the industry as a whole did not⁷.

Separately, the FCA's mortgage rules, which the PRA and FCA supervise together, ban a specific kind of optimistic lending. Under MCOB 11, a firm "must not base its assessment of affordability on the equity in the property which is used as security", nor take account of an expected increase in property prices²⁷. In plain terms, a lender cannot assume that rising house values will rescue a loan the borrower cannot actually afford from income.

The rules appear to be biting. The share of higher-risk regulated residential lending increased over the quarter from 7.8% to 8.1% in Q3 2025²⁸, but by Q1 2026 it had decreased from 6.9% to 6.7%⁵. These are small movements in a large market, but they show the Bank watching the same numbers each quarter. If you want the background to today's affordability rules, see the guide to the Mortgage Market Review.

Payments, CHAPS and scam reimbursement up to £85,000

The Bank processes big payments, including the transfers behind buying a house². Those large transfers run on CHAPS, a designated payment system for which the Bank itself is the payment system operator, retaining responsibility for the system including the CHAPS rules²⁹. Everyday faster transfers between accounts run on a separate system, Faster Payments, regulated by the Payment Systems Regulator.

Since 7 October 2024, both systems carry a mandatory reimbursement scheme for authorised push payment (APP) scams, where you are tricked into sending money yourself. The rules require banks and other payment service providers to reimburse you up to a maximum of £85,000 if you are the victim of a scam³⁰. The Bank of England, as the operator of CHAPS, decided to set the maximum level for CHAPS APP scams at £85,000 per claim⁸, and the Payment Systems Regulator set the same maximum for Faster Payments²⁹. The requirement applies to Faster Payments and CHAPS payments sent and received by payment service providers in the UK²⁹.

The £85,000 figure was not the original plan. In December 2023 the regulator proposed setting the maximum level of mandatory reimbursement at £415,000 per claim, a level it said would apply to all consumers³¹. The final level was set much lower, at £85,000, and the reimbursement dashboard now tracks claims below the £100 excess and above the £85,000 maximum cap as separate metrics³². The value of the excess and the maximum level were themselves the subject of public consultation before being settled³³.

To be eligible, you must have made a transfer as part of a scam on or after 7 October 2024, made the transfer to another UK account, and told your bank or payment service provider no more than 13 months after the last payment³⁰. The rules cover most transfers between UK bank and other accounts³⁰. If your provider does decide to reimburse you, it may deduct an excess of up to £100 for each scam claim³⁰.

If you have been scammed, the Financial Ombudsman can review a rejected reimbursement claim, and the guide to scams and fraud covers the practical steps.

Banknotes, cash and counterfeits

The Bank of England issues the banknotes of England and Wales, and it states that "The money we issue is backed by the Government"¹. Scottish and Northern Ireland banks issue their own notes, but those are backed by Bank of England notes held at the Bank, so the same guarantee sits underneath them.

Cash use has fallen dramatically. Transactional cash use has fallen from over 50% of payments in 2010²², and the Bank of England has committed to continuing to include a question on cash acceptance in its surveys of consumers³⁴. In 2024 the Bank was given new powers under FSMA 2023 to supervise wholesale cash distribution, the network that keeps cash machines and bank branches supplied, and published final Codes of Practice in April 2024³⁵. Those powers are about the system behind the counter rather than the counter itself; the rules on whether your area must keep access to cash are covered in the guide to the access to cash rules.

On counterfeits, the practical point is that genuine Bank of England notes have security features you can check, and the Bank offers a service for exchanging damaged or suspect notes. What the Bank will never do is ask you to send bank statements or National Insurance numbers to verify your identity, unless you are exchanging banknotes with it⁹. That exception exists precisely because banknote exchange is one of the very few reasons a consumer would ever contact the Bank directly.

Cash access also connects to a duty on the banks themselves: large banks have to offer a basic bank account to individuals³⁶. That duty sits with commercial banks, not with the Bank of England, but it is part of the same landscape of rules keeping money usable for people who do not fit standard banking.

The Bank of England never sells savings or investments

The most important consumer protection on this page is a negative one: the Bank of England never sells financial products to the public. Its scam warnings list exactly what it will never do. It will never offer savings accounts, investments, cryptoassets or "guaranteed returns"⁹. It will never provide investment advice or endorsements⁹. It will never ask you to move money "for safety" or to "release funds"⁹. It will never contact you from personal email addresses, and it will never contact you about unclaimed estates, refunds, fines or warrants⁹. It will never verify your identity by requesting National Insurance numbers or bank statements, unless you are exchanging banknotes with it⁹.

The reason for the list is that fraudsters impersonate the Bank. Fake videos and social media adverts have used the Bank's name and the faces of its officials to sell investments, which is why the Bank states that "The Bank of England and its staff do not endorse, promote or advertise financial products"⁹.

If someone claiming to be from a regulator contacts you out of the blue, the advice from the Payment Systems Regulator applies to the Bank too: hang up and contact the organisation directly using publicly listed contact details, do not be pressured into sending money, and end the interaction³⁷. If you think you have already been a victim, contact Action Fraud to make a report and call your bank immediately so it can protect your account³⁷. The guide to scams and fraud lists the warning signs, and the section on complaining about the regulators explains the separate question of making a formal complaint about the Bank, the PRA or the FCA themselves.