The Bank of England (BoE) has opened consultations on a new set of laws that will give more powers to the central bank to order banks to hold more capital buffers during boom times to tackle recessions and keep more capital against certain types of loans.
The government released raft rules on Tuesday as part of the consultations. The Financial Policy Committee (FPC) was established to look for risk situations like property market bubbles and too much debt burden for banks.
The new rules at aimed at ensuring that financial crisis does not occur again and the public funding is not required to bail out banks. The government has said that it is planning to give three major powers to the Committee including authority to change how much capital banks hold to cover exposures in some sectors, to change the level of capital held by banks for regulating the credit supply in the economy and the power to change bank's leverage ratio.
The government has opened the consolations to the banking sector to consider their view points on the matter before the rules are finalized. The draft rules are similar to those sought by the committee in December of 2011.