Osborne Requests BoE to Consider New Power to Control Banks

In 2007 to 2009, England suffered a massive financial crisis which had to be bailed out by taxpayer money. Osborne, the finance minister of Britain, requested that the Bank of England consider whether they need more power to control banks. Banks have been known to take risks that aren’t suitable for a bank, such as investments that can quickly dissolve. The Financial Policy Committee, a part of the Bank of England that controls how banks are operated, is able to require a bank to hold more capital. However, they don’t have a way to affect large banks nearly as effectively. Big banks balances could be more effectively managed through the use of a leverage ratio. The leverage ratio basically works by setting a fixed percent of capital that a bank is able to lend. Unfortunately, the leverage ratio can mean that some banks fall short of the restrictions and are lending too much money. That means they’re going to have to pull money from shareholders to be able to maintain their standing, and to be able to continue to provide lending services. These banking regulations are still up for debate, and are sure to stir up some controversy in financial circles. There’s no question that the banking system is still prone to crisis, however.

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