Treasury select committee chairman Andrew Tyrie says Government proposals to improve the governance of the Bank of England do not go far enough to address the committee’s concerns about its lack of accountability.
The TSC and the Bank have been locked in a bitter battle over the reform of the Bank’s Court and its ability to scrutinise the Bank’s work on maintaining financial stability.
In its report into accountability of the Bank, the committee said it wants the Court to be radically overhauled so it acts as a proper board. The Bank responded saying it wants an oversight committee to be set up under the Court which would be able to commission external reviews. In a short report rushed out for consideration by the Treasury ahead of the publication of the financial services bill, the committee said that did not go far enough.
In guidance on the bill, published alongside the full bill today, the Government says it has agreed with the Bank that if the Bank’s plan is implemented, the oversight committee must also commission “retrospective internal reviews” from Bank policy makers on policy decisions and performance.
The Government will now consider both the TSC’s and Bank’s proposals.
Tyrie says: “Naturally enough, the Bank has no doubt been lobbying hard. Though the Government has accepted some of our recommendations, in other areas its proposals fall short of what is needed.
“The ability to commission internal reviews is an important step forward. But to make it really meaningful, the reformed Bank must strengthen the board structure to assess these reports. In other words, the Bank needs a proper board, capable of satisfying the standards of governance we should expect of any institution in the 21st century.”
The Court came in for heavy criticism after a poor performance by several members in front of the committee last year. Shadow Business Secretary Chuka Umunna, who was then a member of the select committee, said the Bank’s governor Mervyn King had the Court “under his thumb”.
The Government also backs a proposal from the committee to appoint governors for one eight year term instead of two five year terms to remove suspicion that incumbent governors may curry favour with Chancellors to get re-appointed. However, it refused to bow to calls from the committee to be given a veto over the appointment of future Bank governors.
Tyrie says: “It is vital that the governor has the confidence of Parliament as well as the confidence of the Chancellor.”