November 26, 2013 / 9:51 AM / 4 years ago

UK's Osborne asks BoE to consider new power to rein in banks

LONDON, Nov 26 (Reuters) - Britain’s finance minister George Osborne has asked the Bank of England to review whether it needs more power to restrain the balance sheets of banks ahead of a globally agreed timetable.

The BoE’s Financial Policy Committee has powers to set direction for regulating Britain’s financial system.

But the FPC has no direct power to vary the so-called leverage ratio or measure of how much capital banks must hold in relation to their total assets, seen as a key method for reining in risk taking at big banks.

“Therefore now is an appropriate time for the FPC to consider whether and when it needs any additional powers of direction over the leverage ratio, how it should use these powers and how any new powers would fit in with the rest of its macro-prudential ‘tool-kit’,” Osborne said in a letter to BoE Governor Mark Carney.

Osborne was “open” to the review making recommendations that the FPC may need to implement the leverage ratio ahead of a globally agreed timetable, the letter said.

Britain may need to set a baseline leverage ratio higher than the globally-agreed 3 percent level, Osborne said.

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