Reviews into the Bank of England’s response to the financial crisis are too narrowly focused and should have been done much earlier so they could inform the current regulatory shake-up, according to Treasury select committee chairman Andrew Tyrie.
Yesterday, the Bank announced it has set up three internal reviews into its response to the financial crisis. They will focus on ensuring the BoE has the capability to respond to future crises as well as paying close attention to the collapse of Lehman Brothers in the US in September 2008, the recapitalisation of the major UK banks and the deep global recession.
Tyrie says some lessons will be learned from the reviews but that a more comprehensive inquiry is needed.
He says “What is needed is a comprehensive review by the Bank of its performance through the course of the crisis from which we can all draw lessons. That review should have been done much earlier, before the Euro crisis deepened. The FSA produced its own review in late 2009.
“The conclusions of a comprehensive review of Bank performance could, and should, have been available to inform the legislation currently before Parliament to reform financial regulation.”
The Treasury select committee has been in long running battle with the Bank over its accountability in the new regulatory architecture, with all but one member of the committee backing an amendment to the Financial Services Bill aimed at boosting the governance and accountability of Threadneedle Street. The amendment was withdrawn by Tyrie last month after the Government said it would try and find a way of putting the committee’s recommendations in place without resorting to legislation.
Under proposals in the bill, set to be debated later today, the Bank will be home of the Financial Policy Committee, the Monetary Policy Committee and the Prudential Regulation Authority. The committee’s report into the accountability at the Bank, published last November said the new powers would make the Bank a “super-regulator”, calling for its court of directors to be replaced with a modern supervisory board.
Tyrie says: “The fact that this work has not been done illustrates the need to reform the court of the Bank of England.”