LONDON, July 15 (Reuters) - Bank of England Governor Mark Carney and three other policymakers appeared before British lawmakers on Tuesday to discuss last month’s half-yearly Financial Stability Report, which recommended tighter curbs on mortgage lending.
See below for highlights of the remarks from Carney, Deputy Governor Andrew Bailey and the BoE Financial Policy Committee’s external members Don Kohn and Martin Taylor.
“The leverage ratio can have effects on, particularly, the business models of building societies and investment banks. Those effects are schematically detailed in the consultation period.”
“We disagree with the characterisation of the leverage ratio as a backstop. We don’t view it as a backstop, we view it as an integral part of capital framework.”
“I also think that I would be concerned if we, the FPC, saw a reason to raise capital requirements in the system and the leverage ratio didn’t also rise.”
”I think we genuinely believe that the backstop, frontstop vocabulary is unhelpful here and are trying to put forward a proposal where the two ratios do that in a complementary manner.
“I don’t think its quite right to say that the leverage ratio pushes banks to hold riskier assets.”
“My mind is not settled on that because there is a trade-off between complexity and simplicity (for leverage ratio) but there is a real economic issue at the heart of this so that’s why we’re having a consultation.”
”The mix of expertise that is needed for the FPC to function effectively requires some specialist skills that may not be fully applicable to the MPC. The second thing is there are distinct remits here.
“It is absolutely essential that these committees work together as much as possible ... We have been doing that. I don’t think ... it’s necessary, or adviseable to merge the two committees.”
Reporting by UK bureau