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BOE to get more responsibilities.
Graham_Devon
Posts: 58,560 Forumite
http://www.bbc.co.uk/news/business-13750025
Peston summed it up for me, and what seems, most of the commentators on this article...
The creation of the Financial Policy Committee, which has its first meeting on Thursday, represents arguably the most important change to the way the British economy is managed since the Bank of England was given control of interest rates in 1997.
It will be chaired by the Governor of the Bank of England, soon-to-be-knighted Mervyn King, and its members will include his deputies, other Bank of England executives, regulators and some external experts.
What is its task? To spot where banks and other financial institutions are collectively taking excessive risks - and nip such recklessness in the bud before it causes a devastating crash of the sort we saw in 2007-8.
By the end of 2012, the Financial Policy Committee expects to be endowed by Parliament with sweeping powers, to force banks to slow down the pace of lending, if such lending were seen to be leading to a bubble in the housing market, for example.
So, as the deputy governor of the Bank of England, Paul Tucker, told me today, one of the Financial Policy Committee's tasks will be to periodically make itself unpopular, by making it harder for any of us to obtain a mortgage.
But given that the Bank of England failed to stop the last financial crisis, can we be confident it will get it right next time? This is what Tucker said:
"We can do a lot better job than in the past. There were warnings, from this institution, some from the FSA, many from abroad. And yet no one picked up the warnings and ran with them. The government and Parliament are now saying 'Financial Policy Committee, don't let this happen again'.
"Can we promise it'll never happen again over 100 years, 150 years? No it would be silly for me to say that. But can we do a much better job than happened in this country over the last 15 or 20 years? Yes we can".
Peston summed it up for me, and what seems, most of the commentators on this article...
Some regard it as slightly odd that the Bank of England's punishment for not preventing the greatest shock in several generations to the stability of the British economy is to be given even more responsibilities.
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I like this part.....By the end of 2012, the Financial Policy Committee expects to be endowed by Parliament with sweeping powers, to force banks to slow down the pace of lending, if such lending were seen to be leading to a bubble in the housing market, for example0
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Surely the problem before is that the Bank was responsible for the system as a whole but the FSA was responsible for the individual parts of the system, the banks. Clown's master plan was thus a recipe for individual banks making decisions that resulted in systemic risks to slip down the cracks - especially as the FSA busied itself with consumer protection regulations distracting itself and the banks from systemic risks.I think....0
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I like this part.....By the end of 2012, the Financial Policy Committee expects to be endowed by Parliament with sweeping powers, to force banks to slow down the pace of lending, if such lending were seen to be leading to a bubble in the housing market, for example
The thing is, how do you manage that?
If you artificially restrict lending to curb demand, because lack of supply is driving prices up, all that you do is restrict lending to the wealthier and Mr average gets squeezed out.
Artifically restricting lending would only temporarily act like a dam until lending was eased again.
Why don't they look at the root cause and try to resolve that to curb HPI?:wall:
What we've got here is....... failure to communicate.
Some men you just can't reach.
:wall:0 -
IveSeenTheLight wrote: »The thing is, how do you manage that?
If you artificially restrict lending to curb demand, because lack of supply is driving prices up, all that you do is restrict lending to the wealthier and Mr average gets squeezed out.
Artifically restricting lending would only temporarily act like a dam until lending was eased again.
Why don't they look at the root cause and try to resolve that to curb HPI?
The alternative means having to lend ever higher amounts to Mr Average*, until Mr Average gets into financial trouble, or simply can no longer borrow enough.
No easy answer, I'm afraid.
I agree, look at the root cause, and do something about it.
* And I'd argue that in doing so (via ever more easy lending) you are stoking the fire. Mr Average sees the value of property rising and will be keen to borrow as much as he can to "get on the ladder". Another Mr Average sees the same thing, and wants to get in on the act. He wants to buy a property from another Mr Average, who asks for more, knowing that borrowing is not an issue. Didn't this happen in the U.S recently ? Was it not happening here, until the credit crunch ?30 Year Challenge : To be 30 years older. Equity : Don't know, don't care much. Savings : That's asking for ridicule.0 -
The alternative means having to lend ever higher amounts to Mr Average*, until Mr Average gets into financial trouble, or simply can no longer borrow enough.
No easy answer, I'm afraid.
I agree, look at the root cause, and do something about it.
* And I'd argue that in doing so (via ever more easy lending) you are stoking the fire. Mr Average sees the value of property rising and will be keen to borrow as much as he can to "get on the ladder". Another Mr Average sees the same thing, and wants to get in on the act. He wants to buy a property from another Mr Average, who asks for more, knowing that borrowing is not an issue. Didn't this happen in the U.S recently ? Was it not happening here, until the credit crunch ?
Not disagreeing with the above, however if there was more supply, to meet the demand, then HPI wouldn't be rampant.
As it is, it looks like more and more people are likely to be forced (economically) to share properties as they increasingly cannot afford to own on their own.
Renting appears to be slowly going down the same path.
It may seem simple, but if there were sufficient properties, then lending could be relaxed and there wouldn;t be pressure to increase offers to secure a property.
That said of course, the more desireable properties / areas, would always have an element of competative demand.:wall:
What we've got here is....... failure to communicate.
Some men you just can't reach.
:wall:0 -
IveSeenTheLight wrote: »Not disagreeing with the above, however if there was more supply, to meet the demand, then HPI wouldn't be rampant.
As it is, it looks like more and more people are likely to be forced (economically) to share properties as they increasingly cannot afford to own on their own.
Renting appears to be slowly going down the same path.
It may seem simple, but if there were sufficient properties, then lending could be relaxed and there wouldn;t be pressure to increase offers to secure a property.
That said of course, the more desireable properties / areas, would always have an element of competative demand.
Why not just build more homes?
People get housed, economy benefits, taxation take goes up, prices stabilise.
Bank controls development funding, if developers get too greedy then they face the consequences such as Ireland and Spain.
The problem isn't going to go away Tinkering with the fiscal side is smoke and mirrors."If you act like an illiterate man, your learning will never stop... Being uneducated, you have no fear of the future.".....
"big business is parasitic, like a mosquito, whereas I prefer the lighter touch, like that of a butterfly. "A butterfly can suck honey from the flower without damaging it," "Arunachalam Muruganantham0 -
Graham_Devon wrote: »http://www.bbc.co.uk/news/business-13750025
Peston summed it up for me, and what seems, most of the commentators on this article...
:T
So put the clock back 30 years - it should be a single accountable authority.
Caps/controls on sector lending used to be enforced.
Split responsibility just gave each of them a chance to "blame" the other and provide room for each wriggle out of doing what is necessary."If you act like an illiterate man, your learning will never stop... Being uneducated, you have no fear of the future.".....
"big business is parasitic, like a mosquito, whereas I prefer the lighter touch, like that of a butterfly. "A butterfly can suck honey from the flower without damaging it," "Arunachalam Muruganantham0 -
grizzly1911 wrote: »Why not just build more homes?
The obvious answer, but the green lobby and NIMBY brigade will be out in force, and to a degree, understandably so.
The other alternative is........ population control.
Please don't tell anyone I mentioned that :shhh:.
30 Year Challenge : To be 30 years older. Equity : Don't know, don't care much. Savings : That's asking for ridicule.0 -
Surely the problem before is that the Bank was responsible for the system as a whole but the FSA was responsible for the individual parts of the system, the banks
Yes.
The headline might better reflect the situation if it read, "BOE to get back some of the responsibilities taken away in 1997" :eek:'In nature, there are neither rewards nor punishments - there are Consequences.'0
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