In March the interim Financial Policy Committee published proposals for government on the macro-economic tools it would have at its disposal when it is launched in 2013.
It asked for macroprudential policy tools which included having powers of direction over the countercyclical capital buffer, sectoral capital requirements and a leverage ratio.
The FPC however noted that while powers of direction over LTV and loan to income restrictions could be beneficial for financial stability, the use of the tools would require a high level of public acceptability.
Paul Tucker, deputy governor for financial stability at the Bank of England, said in the Financial Times today: “Outright bans on households taking out loans with high LTVs, including banning families borrowing from outside the UK financial system, would, in the view of many of us, be a matter not for the Financial Policy Committee but for government to pursue directly.
“The higher the requirement [of the sectoral capital tool], the closer it approximates to constraining portfolios of high LTV loans. But it would not cut across lenders’ judgements on the creditworthiness of individual borrowers.”
