The Bank of England will need to be more democratically accountable due to its increased influence over socio-economic matters, warns the British Bankers’ Association.
Speaking at a Treasury select committee evidence session this week, BBA chief executive Angela Knight said the increased control over macro-prudential economic tools, to be introduced as part of the regulatory reforms, will give the bank greater control over the availability of credit.
Knight said: “You, as Members of Parliament, could potentially find yourself in situations where you have constituents coming in to see you, saying they cannot get their mortgage, or they cannot get the loan to buy the car, because the Bank of England has made a decision by the financial policy committee, considering that stability means that either the cost of that borrowing has to go up or it is simply not going to be available.”
She said there should at least be a greater degree of democratic representation on the FPC rather than just the one Treasury representative.
Building Societies Association director general Adrian Coles said a system which looks to introduce loan to value limits and similar policies would push people to alternative sources of finance. He said: “It might be not paying credit cards, it might be loans from parents or relatives.”
He added that such policies would cause a big debate on the nature of valuations between different firms that will undermine the efficiency of the limits.
He said: “I do not see detailed regulation of the housing market, in that way, in an open market providing the full answer.”