Pillar talk

14 January 2013 By George Hay Follow @gfhay

The BoE’s new Financial Policy Committee could soon be able to make banks hold extra capital for sector-specific risks. That’s an improvement on the current system. But if the FPC isn’t joined up with other national and global agencies, it could create more confusion.

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The Bank of England on Jan. 14 published a draft policy statement outlining how its Financial Policy Committee may direct banks to take account of macroprudential risks.
Under the draft policy, the FPC would have the ability to direct banks to adjust so-called countercyclical capital buffers for risks in the economy as a whole. It would also have power to act against specific risks in three broad sectors: residential property, commercial property and other parts of the financial sector.
The UK government also intends to provide the FPC with the power to direct banks on a leverage ratio tool, but not before 2018.

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