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Turner calls for lending curbs on banks

FSA chairman Adair Turner has called for the creation of a new official body with powers to force banks to curb lending during financial bubbles.

Turner told the BBC at the World Economic Forum in Davos that he sees the new body, a macro prudential committee, sitting between the Bank of England and the FSA.

It would push up the cost of lending for banks to commercial property businesses by forcing banks to hold more capital relative to their property loans if prices increase too quickly.

Turner told the BBC a similar approach would apply to the mortgage market if house prices were rising too quickly, where the committee could force banks to reduce the amount they can lend relative to the value of individual houses.

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