BoE new measures to ensure financial stability

BoE new measures to ensure financial stability


On Thursday, the BOE’s Financial Policy Committee led by Governor Mark Carney introduced measures to limit riskier home loans and consumer debts.

Mark Carney has ensured that the U.K. economy has grown more strongly than most economists expected over the past 12 months. He also says recovery is improving and strengthening, but the housing market is the main risk which threatens the financial stability of the United Kingdom.

Today, the Bank of England Financial Policy Committee (FPC) has imposed restrictions on mortgage great loans, which hinder the economic recovery.

In addition, the bank has also announced a new test on banks, to prove that  borrowers will have to show that they can repay the mortgage even if interest rates will increase.

Accordingly, the Pound Sterling rose significantly against the US Dollar and the Euro as the BoE new measures may raise expectations that the BoE will hike the interest rates even before the other major central banks.

In fact, The pound rose to $1.7038 on positive comments from Carney, and the Pound had climbed to $1.7063 on June 19, the highest level since October 2008, when Carney indicated that  the BoE may rise  its interest rates sooner than market expectations.
Today’s announcement is the biggest recent effort by a major central bank to actively tackle the threat of economic instability and avoid a repeat of the 2008 financial crisis.

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