UK Chancellor Asks BoE To Take More Control of Banking Sector

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.


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Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza