BoE speaks on fair and effective markets: Andrew Hauser has spoken on the fair and effective markets review. He said the review is looking at the root causes of the various misconducts that have occurred in the wholesale markets, what firms and regulators have done to put things right and what remains to be done. He explained how far culture has moved from the belief that wholesale markets would look after their own interests and maintain market integrity. He noted that firms seemed to lose control of their trading teams, or misincentivised them. He said the task is now to ensure effective market disciplines are re-established and conduct risk management intimately aligned with successfully running the business. He outlined a model that would consider how it might be possible to manipulate markets, consider the role of competition and market discipline, assess the weaknesses in benchmark design and look at standards as they apply in the wholesale markets. Once these have been addressed, firms should consider how to create and apply clear accountabilities, and what are effective tools for identifying and punishing misbehaviour. He reiterated that regulators do not want to stifle the markets, and would work "with the grain" wherever they can. (Source: BoE Speaks on Fair and Effective Markets)
BoE FPC to have new housing and banking powers: BoE's Financial Policy Committee (FPC) is to have new powers of direction over the housing market and a leverage ratio framework for Britain's banks. The announcement follows separate Treasury consultations on granting BoE powers to address financial stability risks caused by the housing market and from excessive leverage in the banking sector. The new powers will include:
- the ability to set limits on debt to income ratios and loan to value ratios for mortgages; and
- powers of direction over the new leverage ratio framework for Britain's banks.