At its meeting on 21 June 2017, the Financial Policy Committee (FPC):
- Increased the UK countercyclical capital buffer (CCyB) rate to 0.5%, from 0%. Absent a material change in the outlook, and consistent with its stated policy for a standard risk environment and of moving gradually, the FPC set out that it expects to increase the rate to 1% at its November meeting.
- Agreed to bring forward the assessment of stressed losses on consumer credit lending in the Bank’s 2017 annual stress test, to inform its assessment at its next meeting of any additional resilience required in aggregate against this lending; and supported the intentions of the Prudential Regulation Authority (PRA) and Financial Conduct Authority (FCA) to publish, in July, their expectations of lenders in the consumer credit market.
- Clarified its existing insurance measures in the mortgage market, designed to prevent excessive growth in the number of highly indebted households. To achieve this, it withdrew its existing Recommendation on affordability tests and replaced it with the following Recommendation:
- When assessing affordability, mortgage lenders should apply an interest rate stress test that assesses whether borrowers could still afford their mortgages if, at any point over the first five years of the loan, their mortgage rate were to be 3 percentage points higher than the reversion rate specified in the mortgage contract at the time of origination (or, if the mortgage contract does not specify a reversion rate, 3 percentage points higher than the product rate at origination). This Recommendation is intended to be read together with the FCA requirements around considering the effect of future interest rate rises as set out in MCOB 11.6.18(2). This Recommendation applies to all lenders which extend residential mortgage lending in excess of £100 million per annum.
- Agreed that it intends to set the minimum leverage requirement at 3.25% of non-reserve exposures, subject to consultation. This is consistent with its previous commitment to restore the level of resilience delivered by its leverage ratio standard to the level it delivered in July 2016, before the FPC excluded central bank reserves from the leverage ratio exposure measure.
- Considered that the Recommendation it made in June 2015 on cyber vulnerability testing had been implemented, and could therefore be withdrawn.
Financial Policy Committee record