The chancellor, George Osborne, has asked the Bank of England to review whether it needs more power to restrain the balance sheets of banks ahead of a globally agreed timetable.
The Bank’s financial policy committee has powers to set direction for regulating Britain’s financial system.
But the committee has no direct power to vary the leverage ratio, a measure of how much capital banks must hold in relation to their total assets, seen as a key method for reining in risk-taking at big banks.
“Therefore now is an appropriate time for the FPC to consider whether and when it needs any additional powers of direction over the leverage ratio, how it should use these powers and how any new powers would fit in with the rest of its macro-prudential ‘tool-kit’,” Osborne said in a letter to the Bank’s governor, Mark Carney.
Osborne was open to the review making recommendations that the committee may need to implement the leverage ratio ahead of a globally agreed timetable, the letter said.
Britain may need to set a baseline leverage ratio higher than the globally agreed 3% level, Osborne said.