New BoE policymaker Stheeman says Brexit and real estate are her top focus

[February 06, 2018]  LONDON (Reuters) - Brexit and high asset valuations, especially for real estate, should be the two major areas of work for the Bank of England's Financial Policy Committee this year, the committee's newest member said on Tuesday.

Pedestrians walk past the Bank of England in the City of London, Britain, May 15, 2014. REUTERS/Luke MacGregor/File Photo

"While the potential risks to financial stability arising from Brexit and from asset valuations have not fully crystallized yet, I suspect that they will both need to be among the major areas of focus for the FPC in 2018," Elisabeth Stheeman told parliament's Treasury Committee.

Banks, insurers and asset managers operating in Britain are already applying for licenses to work in the European Union after Brexit in March 2019, forcing them to decide how many people to move.

"It's important to create some kind of certainty for firms, otherwise they may be pushed into taking decisions," Stheeman said.

Some policymakers have argued that the EU would come off worse than Britain's financial services sector if there is no UK-EU trade deal after Brexit.

Stheeman said it was too early to say if this is true, and argued against fragmenting clearing in derivatives which, she said, would bump up costs for customers across the world.

She gave a blunt warning on commercial real estate in central London, telling lawmakers that prices there were "very fully valued, to say the least", and should be a "wake-up call".

Stheeman is a former chief operating officer for divisions of Morgan Stanley <MS.N> and real estate company Jones Lang LaSalle <JLL.N>.

She now serves on the supervisory boards of German and French real estate companies and is a member of the supervisory boards of German and French property companies and Germany's real-estate focused lender Aareal Bank <ARLG.DE>.

Stheeman said she would recuse herself from FPC discussions of real estate markets in the EU to avoid conflicts of interest, as well as British government gilt issuance, as her husband is chief executive of the UK Debt Management Office.

The FPC does not urgently need any extra powers to direct regulators to take action in addition to existing powers over banks' capital levels and loan-to-income ratios on household mortgages, she said.

(Reporting by Huw Jones and David Milliken; Editing by Raissa Kasolowsky)

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