Targeted measures include: –  limits on high Loan-to-Income mortgages introduced last year, which contributed to the share of households with very high mortgage debt to income ratios falling back to levels last seen in the 1990s (Chart 4);2  –  requirements for banks to assess whether borrowers could still afford their mortgages at much higher levels of Bank Rate; and  –  the current review of underwriting standards for Buy-to-Let being conducted by the Bank’s prudential supervisors.3  Chart 4: FPC action capped share of new mortgages that can be originated at above 4 ½ times income  Risk scenario  0  1  Per cent of new loans  After FPC action  2  3  4  5  Loan to income (LTI) Sources: FCA Product Sales Data and Bank calculations. The risk scenario considered how the distribution of LTIs of new loans might have might evolved if momentum in the housing market had continued to build from mid2014 in a way that was similar to the patterns seen in the UK housing market in the early 2000s.After FPC action line pertains to 2014Q4 – 2015Q3. In addition, given the financial system has moved out of the post-crisis period of heightened risk aversion, the FPC has made clear its intention to set the Countercyclical Capital Buffer above zero before the level of risk becomes elevated. With active macroprudential policy, monetary policy can focus on its primary job of inflation control. It is that to which I will now turn.
These concepts are echoed in the various principles that follow, which highlight more specific recommendations based upon the roles market participants take on and the types of transactions in which they engage. Labels aside, the fundamental recommendations regarding roles recognize the importance of clear communication of roles, the importance of fairness and the strong expectation that discretion not be used in a manner designed to disadvantage a client. Clarity of terminology was again important during the development of Principle 11 on prehedging. The Code is very specific in how it describes pre-hedging. It is defined as “the management of the risk associated with one or more anticipated client orders, designed to benefit the client in connection with such orders and any resulting transactions.” The principle then lays out circumstances in which such pre-hedging may or may not be appropriate. 2/6  BIS central bankers' speeches  The principles on information sharing cover topics where there had seemed to be a lack of clarity within the market. The principles emphasize the importance of appropriately identifying and managing confidential information. They describe what may constitute confidential information and when such information should or should not be shared and with whom. They also provide guidance as to how market participants might communicate market color appropriately and, critically, without compromising confidential information. It is important to recognize that the FX market is not entirely about trading and execution—risk management, compliance, and confirmation and settlement are central to FX transactions, and they comprise the final two sections of the Code.