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Financial regulators 'concerned they won't be able to carry out powers'

Members of BofE financial policy committee say they could struggle to spot excessive lending

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The Bank of England's financial policy committee could struggle to spot excessive lending, some of its own members have said.

The committee, which held its first meeting in June, is set to be given new powers next year over financial regulation. At its March meeting, the committee agreed to ask for powers to impose sector-specific capital requirements on areas where bank credit might grow too fast, its minutes showed.

However, some officials said this could prove hard.

"Some members noted ... that it may prove difficult for the FPC to identify over-exuberant lending to narrowly defined categories of exposure at an early stage," the record published on Wednesday said.

These members were also worried that sector capital requirements would probably have to be increased significantly to have much effect in restraining lending because exuberant sectors usually appeared highly profitable.

"Members agreed that the FPC would need to avoid an excessively activist, fine-tuning approach in setting any sectoral capital requirements," the record said.

The FPC also said that its sectoral capital requirements should purely be used for financial stability purposes, and not to boost particular lending categories.

Last week the FPC urged banks to raise new capital as soon as they could, and also asked for statutory powers to set leverage ratios, countercyclical capital requirements and specific capital requirements for more risky lending.

However, it surprised some observers by not asking for powers to set maximum loan-to-value ratios and loan-to-income ratios, citing a lack of "public acceptability".

In the record, some members also said it would be hard to calculate sustainable levels of property prices needed to set such ratios.


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