UK: financial regulation - the FPC's power of direction

The (interim) Financial Policy Committee has published a statement following its policy meeting on March 16: see here (pdf). Under the new regulatory framework, the FPC will have the power of direction over the Financial Conduct Authority and Prudential Regulation Authority. In this regard, the FPC identified in its statement the following macro prudential tools over which its power of direction should extend: the countercyclical capital buffer; sectoral capital requirements and the leverage ratio. The FPC also noted that powers of direction over loan to value and loan to income restrictions could be beneficial for financial stability but did not recommend that these should be available without further reflection and analysis.

Notes:

• The FPC's power of direction is provided for in clause 3 of the Financial Services Bill 2010-12, which will insert new section 9G in the Bank of England Act 1998.
• A copy of the Bill, in which the amendments made in Committee are highlighted, is available here (pdf). The Bill's Parliamentary progress can be followed here.