HM Treasury has set the Financial Policy Committee’s remit for 2025, confirming the Committee’s priorities and how they should support the government’s economic policy. The letter, sent by Chancellor Rachel Reeves to Bank of England Governor Andrew Bailey, was published on 26 November 2025 and updated on 6 January 2026. It frames stability as the platform for growth and asks the FPC to show how actions support both objectives. ([gov.uk](Link

The remit leans into the government’s growth agenda, referencing the Financial Services Growth and Competitiveness Strategy and the Leeds Reforms alongside a ten‑year plan to keep the UK attractive for investment and innovation. It also sets expectations that the FPC will help unlock long‑term finance for productive investment, while maintaining resilience. ([gov.uk](Link

Mortgage policy remains a live lever. In July, the FPC kept the system‑wide cap that limits high loan‑to‑income lending (≥4.5x income) to 15% of new mortgages, but recommended more flexibility for individual lenders to go above that share so long as the aggregate market stays within the 15% limit. Regulators also raised the de minimis threshold so smaller lenders are outside the cap until new lending exceeds £150m a year. This combination should spread access without loosening the overall guardrail. ([beta.bankofengland.co.uk](Link

For borrowers, the near‑term effect is incremental rather than dramatic. The Bank of England noted that the bigger hurdle for many first‑time buyers remains the deposit, not just income multiples. Before the change, about 9.7% of loans were high LTI; officials suggested the share could settle closer to 11% as lenders use their headroom, still below the system cap. The remit also aligns with the government’s housing ambitions, including a pledge to support 1.5 million additional homes. ([reuters.com](Link

On bank resilience, the FPC’s December assessment lowered its benchmark for the system‑wide Tier 1 capital requirement from around 14% to about 13% of risk‑weighted assets (roughly 11% CET1). The Bank linked the shift to lower average risk weights, changes in systemic importance and Basel 3.1 implementation from 1 January 2027, and said the change should give banks more confidence to lend. Stress tests showed headroom of around £60bn even under a severe scenario. ([bankofengland.co.uk](Link

For SMEs, this points to steadier credit pricing rather than a sudden drop in rates. Capital is one input; wholesale funding costs and risk appetite also matter. The countercyclical buffer remains at 2%, which the FPC reviewed in June 2025, signalling no desire to add extra brakes while growth is fragile. Finance directors should still expect lender differentiation by sector and collateral quality to persist. ([beta.bankofengland.co.uk](Link

A notable thread in the remit is non‑bank finance. HM Treasury asks the FPC to keep building resilience in NBFIs and core sterling markets, including through international work and tools such as the Bank of England’s new Contingent Non‑Bank Financial Institution Repo Facility. The CNRF, opened for applications in January 2025, is designed for episodes of gilt market dysfunction and requires participants to hold around £2bn in gilts, with an £8,000 annual access fee. ([gov.uk](Link

Liquidity operations have also been shifting towards a repo‑led framework. The Bank set records in short‑term repo allotments last year and lifted weekly long‑term repo capacity to £35bn while raising overall ILTR headroom. For treasurers, that’s a backstop against market stress, helping keep core funding channels open even when volatility rises. ([reuters.com](Link

The remit highlights other risks the FPC should weigh: global macro and geopolitical shocks; operational and cyber threats; and the financial stability implications of fast‑moving technologies including AI. It also asks the Committee to continue reflecting climate and nature‑related risks in stress testing, with appropriate time horizons. ([gov.uk](Link

Private markets are firmly on the radar. The FPC is encouraged to use system‑wide tools and international coordination to understand vulnerabilities. The Bank of England is already consulting major private credit groups ahead of a sector‑wide exploratory stress test, with initial results due in early 2027-useful context for lenders financing leveraged borrowers. ([ft.com](Link

Accountability features heavily. The Treasury expects clear public explanations of how actions advance the FPC’s objectives, explicit handling of any short‑term trade‑offs, and engagement with industry and academics. Where legislative change is sought, the FPC is asked to provide evidence that current powers are insufficient and to quantify the private costs of any proposal. ([gov.uk](Link

Bottom line for households and businesses: policy is edging towards targeted flexibility with safeguards intact. Mortgages may become slightly easier to secure at higher income multiples at some lenders; bank capital headroom should support credit supply; and liquidity tools aim to reduce the chance that market stress spills into the real economy. We’ll be watching lenders’ use of the new LTI allowances, the pace of Basel 3.1 implementation to 2027, and whether NBFI tools like the CNRF remain in reserve or are called on during bouts of gilt volatility. ([beta.bankofengland.co.uk](Link