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Bank of England mulls LTV caps

Bank of England deputy governor Charles Bean has hinted that regulators may be considering caps on loan-to-values as part of a range of measures to tackle risky lending.

Speaking at the Federal Reserve Bank of Kansas City Annual Conference in Wyoming on Saturday, Bean said that “direct constraints” on lending are one of a number of tools that regulators can use to try to stave off credit booms.

He said: “There is the option of introducing direct constraints on the terms or availability of credit, for instance imposing maximum loan-to-value
ratios in the mortgage market.”

But he added: “The best approach seems likely to involve a portfolio of instruments.”

Bean also hinted that the Bank may look at further quantitative easing to help sustain the recovery.

Bean said: “The deleveraging process is incomplete, the recovery remains fragile and a considerable margin of spare capacity is yet to be worked off, while further policy action may yet be necessary to keep the recovery on track.”

Bean suggested that higher interest rates would not have been enough to prevent the recent credit boom and subsequent crunch.

In the run up to the credit crunch, the Bank of England increased base rate from 3.5 per cent to 5.75 per cent, but Bean’s comments suggest that hiking it further would not have been enough to stave off the crisis.

He said: “Monetary policy seems too weak an instrument reliably to moderate a credit / asset price boom without inflicting unacceptable collateral damage on activity. Instead, with an additional objective of managing credit growth and asset prices in order to avoid financial instability, one really wants another instrument that acts more directly on the source of the problem.”



The reality of bias

While reflecting on regulation and the retail distribution review recently, I pondered on the original ambitions of the RDR architects and how this interminable roadshow is addressing them. DP07/01 dreamed of “a retail market where consumers are capable and confident, information for consumers is clear, simple and understandable, firms are soundly managed, adequately capitalised and […]


Number of high-earning FSA staff trebles

The number of FSA staff paid over £100,000 has trebled in the past four years. Figures obtained by the Financial Times through a freedom of information request show the FSA had 241 staff paid more than £100,000 in March 2010, compared to 81 in March 2006. During the same period total FSA staff numbers increased […]

Neptune launches Africa fund

Neptune Investment Management today launched an Africa fund which will have at least half of its portfolio invested in South African equities. Managed by Shelley Kuhn, the Neptune Africa fund aims to generate capital growth by investing in securities of companies which are either listed in Africa or are listed elsewhere but but get a […]


MPAA consultation

By Fiona Tait, pensions specialist The chancellor’s announcement of proposed cuts to the Money Purchase Annual Allowance means it will be more important than ever to be able to tell your PCLS from your UFPLS What was in the statement? Not much. The chancellor spared three sentences to inform us that the Money Purchase Annual Allowance will be reduced […]


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