FSA chairman Lord Turner has warned regulators will have the power to cap mortgages using credit control powers last enforced in the 1980s.
They will also be able to limit credit to real estate investors, and force banks to restrict lending in an effort to stamp out speculative bubbles and protect consumers from crippling levels of debt.
Speaking at the Mansion House last night, Lord Turner called for a "mature public debate" on the issue, acknowledging the measures, which "may include maximum loan-to-value ratios", would be "unpopular".
Credit controls would mean some borrowers, who have had no trouble raising money in the past, would be turned down.
The peer also backed the government's proposal to set up a new Financial Policy Committee to attempt to hold back excessive credit growth.
A major part of his speech aslo centred on urging critics of the financial services sector to look at the role of legislators rather than blaming ‘overpaid’ professionals.
The FSA chairman described how financial traders have been demonised recently even though the economic crisis was largely the fault of policymakers and regulatory failures.
He said: "In finance and economics ill-designed policy is a more powerful force for harm than individual greed and error."
However, he did accept "absurd bonuses for excessive risk taking" had been a contributory factor to the financial crisis, while an "explosion of exotic socially useless product development" was also to blame.
Turner also welcomed the proposals emanating from Basel III, regarding capital and liquidity requirements, although he stressed regulatory reform needs to continue.
Consider risk capacity
Via The Exchange
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