Mervyn King rejects MPs’ call for supervisory board

The Bank of England governor Sir Mervyn King has rejected calls from MPs for a new supervisory board to strengthen its accountability and governance structures.

In a Treasury select committee hearing today, King said some new accountability measures were needed in certain areas, but an overhaul of the BoE’s Court which currently functions as its board was not required. Instead the Bank proposes an oversight committee be set up under the court to periodically review decisions made by the Financial Policy Committee.

His position puts him at odds with the TSC which in its report into the accountability of the Bank of England called for a veto over the appointment of future Bank governors and for its Court to be radically reformed to improve the Bank’s accountability. They wanted a board to replace the 12-member court which came in for heavy criticism after a TSC hearing last year.

In written evidence submitted to the TSC on Tuesday, King, and court chairman David Lees said the new oversight committee should house a number of non-executives but that it is vital the oversight committee does not second guess policymakers. TSC chair Andrew Tyrie has already indicated the committee will challenge the proposal for not going far enough.

The document says the oversight committee would occasionally report on the BoE’s financial stability decisions and commission reports by external experts. It adds that it should judge and report on the Bank’s response to any recommendations made by it or external reviews.

The evidence says: “This committee should assess whether the process employed in making financial policy decision have considered a full range of options and have taken reasonable account of the relevant information, analysis, differing views among policy makers and challenges from outside the bank.”

Tyrie says the committee will publish a response to the Bank’s proposal in time for the Chancellor to consider before he publishes the financial services bill which will deliver the new set up. It is likely to be critical of the Bank’s proposal. He says: “Whilst supporting some of our recommendations, on several key points the Court of the Bank falls short of what is needed.”