The Treasury Select Committee is calling on the Bank of England to justify why it thinks it should not be given the power to restrict mortgage lending during housing booms.
The Financial Times reports the TSC is undertaking an inquiry into how the Bank can maintain stability and examine why it has shied away from blocking riskier mortgage lending.
Last week the International Monetary Fund claimed the Bank should have the power to place limits on loan-to-value and loan-to-income ratios.
Paul Tucker, deputy governor for financial stability at the Bank recently wrote that such powers should be limited to politicians.
Chancellor George Osborne is yet to decide what tools to give the Bank’s Financial Policy committee but is expected to come under pressure from the TSC to give it a full range of powers.
Andrew Tyrie, chairman of the TSC, told the FT: “The interim FPC has said that having the power of direction over loan-to-value and loan-to-income restrictions could be beneficial to financial stability and the IMF agrees.
“But the interim FPC did not ask for this power on the ground that the use of these tools would require a high level of acceptability. That reveals a lot.”