Debts

HM Treasury written question – answered on 23rd December 2015.

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Photo of Lord Birt Lord Birt Crossbench

To ask Her Majesty’s Government, further to the Written Answer by Lord Deighton on 9 March (HL5261), whether they have identified a threshold level of private-sector or financial corporation debt that might "threaten financial stability", and if so, what that level is, and what steps they plan to take if it is reached.

Photo of Lord Birt Lord Birt Crossbench

To ask Her Majesty’s Government, further to the Written Answer by Lord Deighton on 9 March (HL5261), whether they have considered setting an explicit target for private-sector and financial corporation debt, and if not, why not.

Photo of Lord O'Neill of Gatley Lord O'Neill of Gatley The Commercial Secretary to the Treasury

As mentioned in the answer of 9 March, the Government does not set a specific target for private sector debt. However, the Financial Policy Committee (FPC), established as a policy committee of the Bank of England, is empowered to identify, assess, monitor and take action in relation to risks across the UK financial system. This includes risks which arise from beyond the core banking sector (such as private sector debt). The FPC actively monitors developments in the aggregate level of credit extended to UK households and private non-financial corporations, and has the macroprudential policy tools required to address any risk it identifies.

For example, the countercyclical buffer is a macroprudential instrument which is designed to protect the banking sector from periods of excess aggregate credit growth that can contribute to system-wide risk. The countercyclical buffer rate in the UK is currently set at 0%, and is reviewed on a quarterly basis.

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