View more on these topics

MPs sound warning over BofE governance and accountability

The Treasury select committee has renewed calls for improvements to the governance and accountability of the Bank of England under the new regulatory architecture.

The committee’s report on the Financial Services Bill, currently at the start of its passage through the House of Lords, warns arrangements for the Bank’s governance must not left to Threadneedle Street, as the Government proposes.

It says: “We note the Government believes that in general, the governance of the Bank should primarily be a matter for the Bank itself. We disagree.”

Peers will debate the bill for the first time on Monday and the committee says it is now down to the House of Lords to push for the changes it is calling for, including the Prudential Regulation Authority getting a competition objective and a rebalancing of the membership of the Financial Policy Committee so the majority of its members are not bank staff.

The report calls for the Banks court of directors to be given a statutory duty to carry out retrospective reviews of the Bank’s performance including on the merits of policy. In April, TSC chair Andrew Tyrie withdrew an amendment calling for the duty and a requirement for the Bank to publish minutes of court meetings after Treasury financial secretary Mark Hoban said he would try and find a way of putting the measures in place.

The bill gives the Chancellor a power of direction over certain activities of the Bank once the governor informs him problems in the economy present a “material risk” to public funds. The committee wants the Chancellor to have a general power of direction over the Bank. It says: “While the specific powers in the bill may cover most events currently foreseeable, the legislation must stand the test of time. A future crisis, many years hence, may require tool not currently considered appropriate, such as those given to the FPC, nor even yet developed.”

The report criticises the lack of time given to debating the bill in the House of Commons adding that it meant Hoban gave no detailed response to an amendment that would have given the TSC a veto over the appointment of the Governor of the Bank. The committee says it wants the Government to explain its opposition to the move as the bill passes through the House of Lords.

Within the Bank, the Financial Policy Committee will have a series of macroeconomic tools to spot and take action against threats to the stability of the UK’s financial system. Concerns have been raised that a financial stability target is not as easily definable as the Monetary Policy Committee’s inflation target, making holding the FPC to account difficult. The report says the Government has given assurances such targets will be available and the bill should require the Treasury and the Bank to agree on targets for the FPC.

Recommended

17

FSA: Omitting high risk products will not compromise independence

The FSA says independent adviser firms will not need to consider products identified by the FSA as high risk and their independent status will not be affected by choosing not to recommend unregulated collective investment schemes. The regulator has published its final guidance today on independent and restricted advice under the RDR. It sets out […]

Globe-Global-World-Map-700x450.jpg

What advisers are saying- reacting to global markets

As Europe’s daily soap opera unfolds with twists and turns a’plenty, the one thing we are consistently hearing is that it is time to get used to the new normal. Central bank intervention, on-the-hoof Government regulation, austerity, unemployment, deleveraging and systemic risk are here to stay but the backdrop is a fascinating combination of forces […]

Keith Churchouse: Taking the pain out of PI

It is that time of the year when we face the professional indemnity insurance renewal. The experience is not one I enjoy and I tend to keep it on my to-do list. What a bore it is when the weighty cover letter, requirements and application/confirmation forms land on my desk. It usually arrives three months […]

1

Osborne defends Budget U-turns

Chancellor George Osborne has defended a series of U-turns on measures set out in the Budget saying it is right the Government listens and changes its mind when necessary. Since March’s Budget, the Treasury has scrapped plans to cap tax relief for charitable giving, cut proposed VAT of 20 per cent on static caravans to […]

Newsletter

News and expert analysis straight to your inbox

Sign up

Comments

    Leave a comment