lower loan to value ratios at origination than loans to owner occupiers. it is not clear how buy to let investors will behave when interest rates go up or if house price growth moderates. the greater initial equity in buy to let may mean that investors are more bis central bankers ’ speeches resilient to small falls in house prices and higher servicing costs than owner occupiers. but they may prove more vulnerable to larger falls in house prices and increases in rates that stretch their rental cover. the majority of buy to let investors in the uk are small landlords ; 78 % of landlords have only one rental property and the majority of buy - to - let landlords are lower rate taxpayers. it is not in my view at all impossible that sharp movements in prices and a loss of confidence in future capital appreciation, in combination with interest rate increases, could cause a substantial number of buy to let landlords to seek to exit the market. this could put material downward pressure on house prices. though buy to let investors are very different to owner occupiers, there is in the end only one housing stock and housing market in the uk. so the risk is that they could amplify an adverse shock to the housing market. rapid growth in any type of debt financed activity should always lead a macroprudential regulator to have a closer look. at present there does not appear to have been a general fall in lending standards. indeed, a number of lenders have tightened their interest coverage ratio criteria over the last 12 months. but we should in my view at the least be monitoring activity and underwriting standards in this market closely and carefully. corporate credit in contrast to household lending and the housing market, lending to corporates remains more subdued though it is recovering. bond issuance has accounted for most of the recent increase in debt. in the two years to june 2015, uk pnfcs increased their level of borrowing from capital markets by £22. 9bn and reduced their borrowing from banks by £1. 4bn. overall, uk pnfc ’ s net debt is still some 30 % below its 2009 peak. the stock of lending to smes, which had been declining for over five years, now seems to have stabilised, though it is some way from growing in line with the economy. the commercial real estate ( cre ) component of credit growth in the uk has often been a source of vulnerability. uk banks have suffered large losses on cre

##clical macroprudential policy as we move forward in the credit cycle, i think we will need to consider whether and how risks are building in the financial system and how they should be addressed. this is of course already a regular and important element of the fpc ’ s discussions. but my guess is that it will become even more so in the next phase of the cycle. with that in mind i want to turn now from the conjunctural assessment of credit in the uk to what may look like a more theoretical question but one that is going to be increasingly important to us – what is the objective and the framework for time - varying macroprudential policy? here i think one can distinguish a number of different strategies. the first is not to attempt time - varying macroprudential policy at all. the second is to set policy to aim to maintain a constant degree of resilience relative to risk. and the third is to use policy actively to lean against the credit cycle. i want to look at these three approaches for the core and riskiest part of the financial system – leveraged banking – and in particular the use of countercyclical capital buffers for banks. i have some sympathy for the “ don ’ t do it at all ” approach. while central banks have, throughout their history, tried to take some account of risks building up in the financial system, explicit and transparent macroprudential authorities like the fpc with mandates and objectives distinct from monetary policy and macroeconomic management are a new development. we have little experience in advanced economies with complex financial systems of operating regulatory policy in a way which varies with the credit cycle. as i pointed out at the outset, the credit cycle can be an even more elusive and difficult to track animal than its cousin the business cycle. and in some jurisdictions where, unlike in the uk, macroprudential policy is done by a number of regulators, with distinct and differing mandates and without clear single authority over the use of macroprudential tools. in those circumstances, time - varying policy may be more difficult to operate. for those reasons, it can be argued that rather than try to operate time - varying policy, the better course is to ensure that the regulatory framework is set to prevent the build - up of risk over the credit cycle and, to the extent it cannot achieve this, to have enough spare resilience in the system to cope with all eventualities. i see however two drawbacks to