BOE to see if regulation has held back economic growth
(14 August 2015 – Britain) The Bank of England (BOE) will examine in an open forum in November whether policies introduced to strengthen the financial stability of the economy have held back economic growth.
City traders and bankers will meet to give their views on regulation in November, which Financial Policy Committee (FPC) chairman Mark Carney believes is the perfect opportunity to “take stock of the reform agenda in financial markets”.
Carney sent a letter to Chancellor George Osborne saying the central bank would “look at the effects of its policies cumulatively as they are implemented, to consider whether policies designed in pursuit of its primary objective give rise to unintended, undesirable consequences when considered in aggregate.”
The FPC was set up by the coalition government and has two objectives: a primary one to monitor and react to risks in the financial system, and a secondary one to support the government’s economic policy.
“The committee will continue to consider the capacity of the financial sector to supply finance for productive investment when judging whether its actions could have a significant adverse effect on the capacity of the financial sector to contribute to the growth of the UK economy in the medium or long term,” Carney said.
Osborne had written to Carney after his July budget, called after the Conservatives won May’s general election. In his letter, Osborne set out the government’s economic policies, focused on boosting UK productivity and improving competitiveness in the financial sector.
Carney said: “The progress made in fixing the fault lines in the banking system means that the committee is now more able to broaden its focus to potential risks emanating from and associated with non-bank activities.”
He said the Bank would look at the risks posed by liquidity drying up in markets and review the potential risks posed by non-banks such as investment funds and hedge funds.