On February 2, 2015, the UK Government announced that it would be proceeding with the recommendations of the UK Bank of England’s Financial Policy Committee (“FPC”) to give the FPC powers of direction over the housing market and the leverage ratio for UK banks. The new powers will enable the FPC to direct the Prudential Regulation Authority (“PRA”) and Financial Conduct Authority to require regulated lenders to place limits on residential mortgage lending (owner-occupied only) and direct the PRA to set: (i) a minimum leverage ratio requirement; (ii) a supplementary leverage ratio buffer that will apply to globally systemically important banks (“G-SIBs”) and other major domestic UK banks and building societies, including ring-fenced banks; and (iii) a countercyclical leverage ratio buffer. Draft legislation providing for the new FPC powers has been put before the UK Parliament. On February 4, 2015, the FPC published draft policy statements detailing the specific tools, the firms subject to the requirements, timelines for implementation, how the tools might affect financial stability and economic growth, how the FPC intends to take decisions over setting the countercyclical leverage ratio buffer and the proposed calibration of the tools.
The announcement is available at: https://www.gov.uk/government/news/government-confirms-new-powers-for-bank-of-england-to-guard-ag ainst-future-financial-risks and the FPC papers are available at: http://www.bankofengland.co.uk/financialstability/Pages/fpc/policystatements.aspx.