BSA conference: Darling warns FPC could impact mortgage availability

Former chancellor Alistair Darling is warning that the Financial Policy Committee could have the power to restrict the availability of mortgages.

Speaking at the Building Societies Association conference in Manchester today Darling says the newly created FPC, which will have responsibility for financial stability, will be able to influence interest rates.

Darling says: “The FPC does in theory have the ability to affect the availability of mortgages by influencing interest rates based on financial risk rather than monetary policy.

“This is new and unchartered territory that no one else is attempting so we will have to keep a pretty close eye on it.

“The next governor of the Bank of England will indeed need super-human powers because he or she is being asked to do an awful lot.”

Darling also questioned the rationale of putting all regulation in the power of the Bank of England saying he has some reservations about its effectiveness.

He says: “I have some doubts about creating some super regulator that has responsibility for monetary policy, deals with prudential policy and now will try to anticipate the storms that might be gathering.

“The government has put it all under one roof but needs to remember it is still down to individual regulators. But it’s happened now and maybe it’s a political fix but in the course of being legislated we should all do our best to try and make it work.”

Darling also believes the Independent Commission on Banking will not lead to the end of bank bailouts.

He claims the reforms suggested by Sir John Vickers’ ICB will not stop government rescues but they are a good move.

He adds: “There is no chance any government will let banks fail no matter how small even with eth Vickers reforms. It is why I decided to take on the Dunfermline when it was in trouble. Vickers doesn’t mean there will be no influence from governments in future.”