The Treasury select committee is calling on the Bank of England to justify its view that the bank should not be given the power to restrict mortgage lending during housing booms.
The Financial Times reports the TSC is undertaking an inquiry into how the BoE can maintain stability and examine why it has shied away from blocking riskier mortgage lending.
Last week the International Monetary Fund said the BoE should have the power to place limits on loan-to-value and loan-to-income ratios.
BoE deputy governor for financial stability Paul Tucker recently wrote that such powers should be limited to politicians.
Chancellor George Osborne is yet to decide what tools to give the BoE’s Financial Policy committee but is expected to come under pressure from the TSC to give it a full range of powers.
Speaking to the FT, TSC chairman Andrew Tyrie said: “The interim FPC has said that having the power of direction over loan-to-value and loan-to-income restrictions could be beneficial to financial stability and the IMF agrees.
“But the interim FPC did not ask for this power on the ground that the use of these tools would require a high level of acceptability. That reveals a lot.”