Thursday, 2 July 2009

UPDATE: BOE Miles: Better Stricter In Macroprudential Tools

UPDATE: BOE Miles: Better Stricter In Macroprudential Tools
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LONDON -(Dow Jones)- Bank of England Monetary Policy Committee member David Miles said Thursday that the experience of the financial crisis suggests that it's better to err on the strict side when implementing macroprudential regulation.

In a speech at the London School of Economics, Miles said it is difficult to gauge the impact of house prices on consumer spending, since their movements in either direction create both winners and losers, and the outcome depends on how forward-looking homeowners are.

He also said it would be sensible to consider whether commission paid to financial intermediaries on mortgage deals is appropriate, and if it should be banned for the same reason that commission on savings products already has been.

"Given what we have been through, I think it makes sense to take more type 1 risk in thinking about regulation; that is, the risk of being too tough on some products and institutions when we need not have been," Miles said.

He added that it might be sensible to take a similar stance on dictating absolute limits of loan-to-value ratios on mortgages.

Miles also said he has "no enthusiasm" for capital gains tax on owner-occupied properties, since it isn't clear that house price rises create a real increase in wealth.

-By Natasha Brereton, Dow Jones Newswires; +44-20-7842-9254; natasha.brereton@dowjones.com

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(END) Dow Jones Newswires

July 02, 2009 12:49 ET (16:49 GMT)


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