BoE new measures to ensure financial stability
06.26.2014
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.
