THE BANK of England’s new financial policy committee (FPC) needs more powers to control bank lending, MPs said yesterday – as members threatened they could try to block the appointment of FPC members who disagree.
Incoming official Dame Clara Furse told the Treasury Select Committee (TSC) that the FPC already has substantial powers over the industry, and does not yet need further powers to cap banks’ leverage ratios.
“We do not need the power now. We have two tools of recommendation and of direction, giving the FPC pretty extensive powers,” Dame Clara said. “We need to establish that we can use those tools and use them well.”
But MP Jesse Norman attacked the ex-London Stock Exchange boss, saying it is vital she demands extra powers when in the role.
“Your testimony has been amazingly unimpressive. You are not aware of any concerns of the TSC on independence of the FPC, you are disengaged on the leverage ratio which is the crucial question for the FPC at the moment,” said Norman. “I shall be thinking very seriously about whether I can support this nomination.”
Meanwhile Richard Sharp, a former Goldman Sachs banker joining the FPC warned of operational risk at big banks.
“One of the legitimate issues when we move beyond too big to fail is too big to manage,” he said, referencing JP Morgan’s and UBS’ trading losses and HSBC’s money laundering control failures in Mexico.
And former Barclays’ chief executive Martin Taylor told MPs the FPC should not stir up worries over bank capital levels.
“I would hope the FPC would not spend all its time re-opening the bank capital question; we seem to be moving from a wildly inadequate position on capital levels to one that should soon be roughly satisfactory,” Taylor said in written evidence to the committee.