Bank of Eng­land may act if lend­ing speeds up: Jon Cun­liffe

The Pak Banker - - FRONT PAGE -

LON­DON: The Bank of Eng­land will con­sider steps to safe­guard fi­nan­cial sta­bil­ity if house­hold debt grows faster than the rest of the econ­omy, the bank pol­i­cy­maker in charge of fi­nan­cial sta­bil­ity said to­day. Bri­tish house­hold debt, mea­sured as a share of in­come, has fallen sub­stan­tially from its peak dur­ing the fi­nan­cial cri­sis and has now sta­bilised around lev­els last seen in 2004. Deputy Gov­er­nor Jon Cun­liffe said he did not want a re­turn to the sit­u­a­tion be­fore the fi­nan­cial cri­sis, when credit grew twice as fast as the econ­omy as a whole. "If credit be­gan to grow faster than GDP, I would want to think very se­ri­ously about tak­ing ac­tion to man­age that sooner rather than later," Cun­liffe said at a con­fer­ence hosted by the Bri­tish Prop­erty Fed­er­a­tion. Bri­tish house­holds' gross debt peaked at 155 per­cent of their an­nual af­ter-tax in­come in 2007, then fell dur­ing the fi­nan­cial cri­sis and has held at around 135 per­cent since 2012. A broader mea­sure which in­cludes busi­ness loans - credit as a share of GDP - peaked at 177 per­cent in 2009. It is now about 140 per­cent, a bit below av­er­age for an ad­vanced econ­omy. Cun­liffe said it would take sev­eral years of bor­row­ing grow­ing faster than wages or the econ­omy as a whole to take debt to dan­ger­ous lev­els. But mea­sures might need time to take ef­fect, ar­gu­ing in favour of act­ing ear­lier. Any ac­tion is un­likely to take the form of rais­ing record-low in­ter­est rates. The BoE has said higher rates would be a last re­sort to tackle ex­cess bank lend­ing; they are used to guide con­sumer price in­fla­tion to­wards its 2 per­cent tar­get. In­stead, the BoE's Fi­nan­cial Pol­icy Com­mit­tee has a wide range of pow­ers to re­quire banks to curb mort­gage lend­ing and limit bor­row­ing more gen­er­ally. In 2014, the cen­tral bank re­quired lenders to heav­ily re­strict high loan-to-value mort­gages, and Tues­day's re­marks sug­gest broader curbs could be needed if lend­ing picks up. De­spite a dark­en­ing global eco­nomic out­look, Bri­tish con­sumer de­mand has been buoyed by record em­ploy­ment, low in­fla­tion and a mod­er­ate in­crease in wages.

Newspapers in English

Newspapers from Pakistan

© PressReader. All rights reserved.