Planned FPC powers

■ Counter-cyclical capital buffers to try to keep lending steady

■ The FPC will be able to make banks build up capital buffers in good years and run them down in bad years

■ That means banks will not collapse when the economy slows, but instead have a cushion they can use up to keep lending going

■ And it also stops them lending too much in good years, because they have to save up for tougher times

■ Changing leverage ratios is also designed to stop banks over-reaching themselves by lending too much

■ The leverage ratio is a measure of loans to equity. A three per cent leverage ratio cap means a bank’s equity can be leveraged up to 33 times. A four per cent ratio means it can be leveraged up to 25 times.

■ Sectoral capital requirements are designed to stop bubbles building in future

■ Banks will have to hold more capital when lending in sectors deemed to be overheating

■ So if the FPC thinks another housing boom is on the way it can raise capital levels for mortgage lending and so reduce the amount of mortgages banks offer

■ But the FPC will not – yet – be able to put more direct limits on household lending

■ It did consider asking to be allowed to limit loan to value ratios in, for example, a housing boom

■ But for now the consultation is only considering whether or not the FPC can ask for that power in future