Which of the following best describes the secondary objective of the PRA?

The secondary objective of the Prudential Regulation Authority (PRA) is to facilitate effective competition in financial markets. This objective is essential for ensuring that the financial services industry operates efficiently and serves the needs of consumers and businesses. By promoting competition, the PRA aims to create an environment where firms can innovate and improve their services, ultimately leading to better outcomes for customers.

Encouraging competition also helps in mitigating systemic risk as it prevents the dominance of a few large players in the market. A competitive landscape fosters resilience within the financial system, as it encourages a range of providers to offer various products and services, contributing to overall market stability.

While the other options touch on important aspects of financial regulation, they do not align with the PRA's established secondary objective focused on competition. Imposing strict penalties could be part of the overall regulatory framework but is not an objective in itself. Protecting investor rights is crucial but is part of the broader mission of ensuring market integrity rather than a specific secondary aim. Ensuring firms remain profitable, while important for the health of the economy, is not a regulatory goal that the PRA actively pursues; rather, their focus is on maintaining financial stability and ensuring that regulations do not hamper competition unduly.