The Government has decided not to radically reform or scrap the Court of the Bank of England, despite warnings from the Treasury select committee that more effective governance is required.
Last night, the Chancellor George Osborne announced he was backing a Bank of England plan to establish an oversight committee under the Court charged with scrutinising the Bank’s work on financial stability.
TSC chairman Andrew Tyrie warned last month that this proposal did not go far enough and called on the Government to back the TSC’s plan to replace the Court with a new supervisory board to create “a proper board that is fit for the 21st Century”.
Speaking during the second reading debate on the financial services bill last night, Osborne said: “While I do not propose to abolish the Court of the Bank of England, I do propose to give it important new powers to hold the executive Bank to account.
“The Governor and the Court of the Bank of England have agreed that a new oversight committee, consisting of the non-executive members of the court, should be created. This group of external independent people will ensure that the Bank discharges its financial oversight responsibilities correctly.”
Shadow Chancellor Ed Balls said: “We think that there is further to go to ensure that there is proper accountability and we will be proposing reforms.”
The Bank’s Court came in for heavy criticism after a poor performance in front of the TSC. Shadow Business Secretary Chuka Umunna, who was then a member of the committee, said Mervyn King had the Court “under his thumb”.
In its report into accountability at the Bank, the TSC warned that under the new regulatory architecture the Bank will become a “super-regulator” and called for its accountability to be strengthened. The committee’s call for future Bank governors to serve one non-renewable eight year term instead of the current two five-year term limit has been accepted by the Government. However, its call for a veto over the appointment of future governors has been rejected.
TSC member and Conservative MP for Wyre Forest Mark Garnier told MPs: “The Chancellor took the unprecedented and extremely welcome move of giving the Treasury committee a power of veto over the appointment of the chairman of the Office for Budget Responsibility. Now we have seen how well that works in practice, we think the governor’s appointment is another occasion for which such a power of veto would be appropriate.”