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* Sharp cautions that FPC is not "omniscient"
* Says focus should be on keeping broader system resilient
* FPC meets on June 17, property market on agenda
* Sharp says will consider whole UK housing market, not onlyLondon (Adds comment on housing market)
By Huw Jones
LONDON, June 4 (Reuters) - The Bank of England's new riskwatchdog, which this month will consider what to do aboutBritain's surging housing market, cannot be expected toeliminate the risk of asset price bubbles, a senior policymakersaid on Wednesday.
The BoE's Financial Policy Committee (FPC) is still anexperiment using untested tools, said Richard Sharp, an externalmember of the FPC.
The committee, which next meets on June 17, is underpressure to cool Britain's property market where prices arerising by double digits in some areas.
Some economists see a bubble in London already althoughthere have been some signs of a cooling of the market as tougherhome loans rules introduced in April bite.
BoE Governor Mark Carney said last month that housing wasthe biggest threat to Britain's economic recovery.
"We are not responsible for house prices. We are responsiblefor financial stability," Sharp told students at the LondonSchool of Economics.
"We will look at the nation as a whole because sometimesit's too easy to be preoccupied with the consequences of foreignbuyers in London. With respect to when and if we act, theapproach should be graduated," he said.
Sharp, a former banker of 23 years at Goldman Sachs, sought to downplay expectations about the committee's ability to tacklebubbles with precision.
"When it comes to evaluating the FPC, please do not expectan omniscient committee which, by their collective capabilities,can always successfully anticipate shocks," Sharp said in hisfirst speech as an FPC member.
"Whilst we will do our best to anticipate shocks andminimize the possibility of them arising, it is better that theFPC should be viewed as unequivocally accountable for ensuringthat, when such shocks do occur - and indeed they will - thesystem has built up sufficient strength and resilience so thatsuch events can be effectively managed."
The FPC, launched in April 2013, can use so-calledmacroprudential tools, such as forcing banks to hold morecapital, in a bid to deflate bubbles without the need to raiseinterest rates.
"When using its tools, the FPC aims to take graduated andproportionate action, where possible. The committee has stressedthis approach, for example, when considering risks stemming fromthe housing market and the set of tools that it could deploy tomanage these risks as, and if, they emerge," Sharp said.
He said the conduct of macroprudential policy was vitallyimportant but is also particularly challenging.
He also said it was hard to identify the build-up ofsystemic risks and there was a lack of empirical evidence on howeffective macroprudential tools are.
Economic history is a useful reminder that seeking to"forecast future market directions or developments is invariablyan extremely hazardous exercise."
Macroprudential policy should focus on keeping the widerfinancial system resilient so that it can deal with anyunexpected shocks, Sharp said.
The challenges facing the FPC include risks around economicrecovery, the need for banks to make progress in building uptheir capital buffers, and the impact on asset prices ifinterest rates rise quickly, he said.
It was perfectly conceivable that new shocks or difficultieswere just around the corner, Sharp added. (Editing by William Schomberg and Robin Pomeroy)
