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MPs want NAO to check out the Bank of England

MPs have called for the Bank of England to come under the scrutiny of the National Audit Office.

In a report this week on maintaining financial stability in the banking system, MPs on the public accounts committee have called for the BoE to be audited by the NAO, just as the FSA will be from 2010/11.

The committee also raised the issue of state-backed banks Royal Bank of Scotland and Lloyds failing to meet their lending commitments to small businesses.

It urged the Treasury and Bank of England to analyse the reasons why the banks are failing to do so.

The committee criticised the Treasury for failing to not- ify Parliament of an £18bn indemnity covering emergency loans provided by the Bank of England to Royal Bank of Scotland and HBOS in October 2008.

It blasted the Treasury for paying “success fees” to investment banking advisers where no success criteria could be specified, as well as for paying costly retainers to firms. It said the Treasury risks “accepting City bonus practices that are wholly unacceptable in the public sector”.

redit Suisse and Deutsche Bank were initially appointed on retainers of £200,000 per month for a year, with the potential to earn success fees of up to £5.8m.

The report says: “Despite the enormous amounts of taxpayers’ money at stake, the National Audit Office has not been able to examine directly the actions of the Financial Services Authority and the Bank of England. We welcome the recent announcement that the National Audit Office will shortly be appointed as auditor of the FSA, but this leaves the Bank of England as the only member of the tripartite authorities not audited by the NAO.”

Lansons director of regulatory consulting Richard Hobbs says: “Oversight and audit of both the FSA and the Bank of England by the NAO is long overdue.”

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