8 Feb

Bank of England gets new powers

Bank of England gets new powers

The Bank of England has been granted powers that will enable it to exert more control over the UK housing market.

City minister Andrea Leadsom confirmed the central bank's Financial Policy Committee (FPC) will be able to set limits on debt to income ratios and loan to value ratios for mortgages, as part of new tools to ensure stability of the property sector.

George Osborne confirmed plans to increase the Bank of England's powers in his Mansion House speech last year as a bid to reduce potential housing market problems.

The Treasury has also conducted consultations to assess the impact of the central bank having more control over the housing sector.

"The Bank of England will have further powers to safeguard the stability of Britain’s financial system from any future risks posed by our housing market or banks," explained the chancellor.

"Curbing Britain's age-old vulnerability to banking and housing booms is one of the goals I recently set for the next two decades of Britain’s economic policy, and this announcement of new powers for the Bank of England shows our determination to achieve this," he added.

A number of other central banks across the world have similar powers, with the ability to set loan to value limits used in countries such as Canada, New Zealand and Norway.

The government now plans to consult parliament on the possibility of the FPC having powers to control the buy-to-let market in order to limit potential risks to the economy.

Andrew Tyrie, chairman of the Treasury Committee and former chairman of the Parliamentary Commission on Banking Standards, welcomed the new powers, but raised concerns over the need to make the FPC operate in an open way.

"These new powers will affect millions of taxpayers and households across the country. The FPC is still largely unknown to the public and it is therefore crucial that it is transparent about how it reaches its decisions," said Mr Tyrie.ADNFCR-1222-ID-801774288-ADNFCR

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