Treasury select committee member David Ruffley has warned that the TSC does not have the expertise to properly scrutinise the Bank of England’s work on financial stability.
Under the Financial Services Bill, the bank’s financial policy committee will be responsible for protecting and enhancing the stability of the UK’s financial system. The Government is considering calls from the bank for the FPC to have powers to set counter-cyclical capital buffers, leverage ratios and place capital requirements on specific sectors to take the heat out of emerging bubbles.
Speaking in a debate on the bill in the House of Commons this week, Conservative MP Ruffley said: “Not for the want of trying, the committee does not have the technical expertise or the macro and micro-economists needed to conduct work month after month, tracking back and looking at how good or bad the judgment calls of the FPC, as constituted by the Bill, and the monetary policy committee turn out to be.
“And, my word, such backward-looking analysis is needed. If it had been present in 2007 and 2008, we might have avoided the difficulties of which we are all too well aware.”
Shadow Treasury financial secretary Chris Leslie said the TSC will be too busy to scrutinise regulation coming out of the bank. He said: “Some sort of financial services scrutiny committee is required, with the time to go through the ramifications properly and thoroughly.”
Leslie first called for a new Parliamentary committee to scrutinise regulation last May amid concerns that the TSC will not be able to cope with the “considerable volume” of new regulation under the new structure.