LONDON -- U.K. lawmakers tasked with scrutinizing economic policy Wednesday launched an inquiry into whether the Bank of England should be granted new powers to safeguard financial stability.

The Treasury Select Committee kicked off the inquiry process by announcing the terms of reference for a probe into the BOE's proposed macroprudential toolkit--a set of policy instruments the central bank is seeking in order to carry out its new role overseeing the financial system.

Under a shake-up of U.K. financial regulation by Prime Minister David Cameron's coalition government, the BOE will next year regain powers it lost in earlier reforms in 1997 to police banks and safeguard the stability of the financial system.

A new Financial Policy Committee will try to head off any major system-wide risks and prevent lending in the economy getting dangerously out of control.

In March, the FPC recommended lawmakers grant it three powers to carry out its mandate: the power to require banks hold more or less capital depending on the economic backdrop; the power to require banks to hold more or less capital against loans to specific sectors of the economy, and the power to vary firms' leverage ratio.

"With these new tools the bank will have a profound and even more direct impact on millions of individuals, households and businesses up and down the country," said Andrew Tyrie, chairman of the Treasury Select Committee.

The committee said it will examine whether the three tools the BOE has requested are appropriate for its new role or whether alternatives might be better. It will also investigate whether central bank officials will be properly accountable to lawmakers and the public when they wield their new powers.

"We will ensure that the public gets a full explanation from the bank when they use any of their macroprudential tools. Hence this inquiry," Tyrie said.

The deadline for written evidence to be submitted is June 22 and the committee will begin questioning witnesses soon after, the committee said.

-By Jason Douglas, Dow Jones Newswires; 44-20-7842-9272; jason.douglas@dowjones.com