Instruments of Macroprudential PolicyDeloitte responds to Discussion Paper |
On 8 February 2012, the Deloitte Centre for Regulatory Strategy responded to the Discussion Paper Instruments of Macroprudential Policy, prepared by the Bank of England and the Financial Services Authority (FSA) under the guidance of the interim Financial Policy Committee (FPC), which sought views on instruments that the FPC should have at its disposal to tackle risks to the financial system effectively. The interim FPC will make recommendations to Government on its statutory instruments, as requested by HM Treasury, following its March 2012 meeting.
Deloitte believes the work of the FPC is potentially extremely important in lessening the likelihood of a major financial crisis in future, but recognises the Committee’s actions could have major impacts on the economy. As such, society needs to decide how much it is prepared to lessen the chance of problems in future, and which instruments are most likely to be effective in meeting these aims. For this reason, Deloitte welcomes the opportunity to comment on this Paper, and has concentrated on the key points to be taken into account when deciding on the tools, rather than a detailed critique of each, emphasising the need for a range of measures that are credible and reflect the international nature of the London market.
Clifford Smout, Partner at the EMEA Centre for Regulatory Strategy at Deloitte, said ‘it will be important to judge the effect of these tools in combination with other policy instruments, such as existing capital rules, taxation and monetary policy. And the Committee should not focus exclusively on instruments that aim to counteract the cycle. Sorting out structural issues is at least as important a way to embed financial stability in the UK system’.
Deloitte will follow closely how this progresses and provide a further update following the interim FPC’s recommendations.
