Boom and bust days in Chancellor George Osborne’s sights

A NEW, independent Bank of England committee could be given sweeping powers to prevent another financial crisis, Chancellor George Osborne has revealed.

A financial policy committee would be able to set loan-to-value ratios on mortgages and force banks to hold more capital to stop credit bubbles growing out of control, as part of reforms the Chancellor said would “affect the bread-and-butter of people’s daily lives”.

The committee would be chaired by the governor of the Bank of England, he said, telling MPs that its job would be to “moderate a credit boom and alleviate a credit bust”.

Speaking in the House of Commons at the second reading of the Financial Services Bill yesterday, Mr Osborne said the committee could “alter the maximum loan-to-value ratios in mortgage lending to curb a sharp, unsustainable rise in house prices”.

It could also cut the ratios, as well as change the capital requirements of banks, he said, as he outlined “potential tools” the committee could use, completely independent of ministers.

Mr Osborne told MPs: “The precise tools we give to the financial policy committee are yet to be determined. I freely accept that we are largely in uncharted territory in policy making here, or indeed anywhere in the world.

“I am aware that lots of other jurisdictions are considering these types of things but I think we are ahead of many jurisdictions.”

He added: “These are very important tools that we are going to give this body which have a real impact on our constituents about the kind of house they are able to afford on the income they have got.”