News
With the Bank of England to gain wide-ranging new powers as part of the government's overhaul of financial regulation (draft Financial Services Bill), the court of the Bank has published a series of points to recommendations made by the Treasury committee and joint committee over the future accountibilty of the Bank. Some key points:
• The new responsibilities for the Bank of England in the area of financial stability will need to be accompanied by new accountability mechanisms. As with the mechanisms for monetary policy, at the centre of these should be direct accountability to parliament through the Treasury Committee.
• Building on the recommendations of the Treasury and Joint Committees, the Bank propose that this is supplemented by establishing an Oversight Committee, with direct access to the policymaking processes and papers in the Bank, and formed of non-executive directors.
• The role of this Committee should be to assess whether the processes employed in making financial stability policy decisions have considered a full range of options and have taken reasonable account of the relevant information, analysis (including of the lessons from the past), differing views amongst policymakers, and challenges from outside the Bank.
• The Oversight Committee should also commission reviews from experts outside the Bank of the performance of the Bank's financial stability policymakers. These reviews would recommend lessons for them. And the Oversight Committee would assess the Bank's response to those recommendations.
• The Bank's financial stability role gives it operational responsibility for managing a financial crisis. All decisions in a crisis involving public funds, regardless of the amount, are however, for the Chancellor. So the forthcoming crisis management Memorandum of Understanding between the Bank and the Treasury should establish a clear framework for co-ordination. It should also establish a power for the Chancellor, when public funds are at risk and there is a serious threat to financial stability, to direct the use of the Bank's tools of crisis management.
• The Bank supports the Treasury Committee's recommendation that future Governors of the Bank should be appointed for a single eight-year term.
Published: 19 January, 2012