Not surprisingly, and as Financial Policy Committee external member Martin Taylor predicted, his comments on the housing market have got plenty of attention.
Reading his speech from Monday though, we think there was another comment in there worth keeping an eye on.
It’s clear that the safety of the banking system is an absolutely central objective, and one which the FPC has already worked on and will continue to address. But is that enough?
Some hurried back-covering from Britain’s Financial Policy Committee, which last met on September 18…
In the United Kingdom, the continued recovery of the banking sector had been associated with a further easing in credit conditions. Against that backdrop, the recovery in the housing market appeared to have gained momentum and to be broadening.
UK banks are facing increased pressure from regulators to use strong earnings to build up capital ahead of official requirements rather than paying out most of it to staff and investors, the FT reports. Although Basel III gives banks until 2019 to meet new “core tier one capital” requirements, the Financial Services Authority, which has power to veto bonus plans if it believes they are hindering capital-building, wants banks to outline a “flight plan” which takes into account bonuses, dividends and the potential for another economic downturn. The BoE’s Financial Policy Committee is expected to step up calls for “opportunistic capital building”, and officials have been blunter in private over the need for action.
Sir Richard Lambert has rejected his appointment as a founder member of the Bank of England’s Financial Policy Committee, a new body overseeing the financial system, a month before the FPC holds its first meeting, reports the FT. Having been appointed in February, the former CBI employers’ organisation chief and FT editor announced he would not take his place on the committee. The FPC will ultimately have powers to tackle asset bubbles and credit binges with tools including the possibility of curbs on loan-to-value rates. In its first meetings it will advise the Treasury on how to implement the bank’s Financial Stability Report. Sir Richard said his position as an external member would be very part-time, since the FPC would meet only once each quarter, and would present conflicts of interest as he wanted to comment on public policy in future roles.