The Chancellor announces today (21 July 2015) that the government will bring forward a Bank of England Bill this autumn to improve the Bank of England’s governance and accountability, ensuring that the Bank remains at the forefront of international best practice.
This bill will build on the success of the Financial Services Act 2012 which fundamentally reformed the UK’s system of financial regulation, dismantling the failed tripartite system and placing the Bank of England at the centre of a new system of financial regulation.
Today’s announcements go further to ensure that the Bank is on the best possible footing to oversee its expanded remit, by implementing Governor Carney’s ‘One Mission, One Bank’ strategy to bring all parts of the Bank’s responsibilities under one shared vision and culture.
The bill will also build on the substantial progress the government has made to protect tax payers from firm failure, by updating resolution planning and crisis management arrangements between the Treasury and the Bank to reflect recent improvements to resolution planning for systemic financial institutions, and crisis management for institutions in distress.
The Chancellor said:
Ensuring the Bank is well positioned to fulfil its vital role of overseeing monetary policy and financial stability is a key part of the government’s long term economic plan
The measures in the Bank of England Bill will ensure that the Bank is on the best possible footing to oversee its expanded remit, delivering Governor Carney’s ‘One Mission, One Bank’ strategy, and take further steps to protect tax payers from firm failure
Bringing the Bank of England for the first time within the purview of the National Audit Office is an important reform and will improve transparency and accountability.
The Treasury has published a consultation seeking views on reforms to the Bank of England.
In the consultation document published today, the Chancellor set out that the Bank of England Bill will bring forward the following reforms:
- improve the accountability and governance of the Bank by making its Court of Directors a smaller, more focused unitary board
- implement the recommendations of the Warsh review by moving the Monetary Policy Committee (MPC) to a schedule of eight meetings a year
- maximise the synergies of having monetary policy, macroprudential policy and microprudential policy under the aegis of one institution by bringing the Prudential Regulation Authority within the Bank, ending its status as a subsidiary, and establishing a new Prudential Regulation Committee within the Bank
- adjust the statutory basis of the Financial Policy Committee (FPC) from a statutory committee of the Court, to a committee of the Bank, in line with the MPC and the new PRC and transfer responsibility for setting the financial stability strategy from the Court to the FPC
- place the new Deputy Governor for Banking and Markets in legislation, adding the position to the Court of Directors and the FPC
- a new external member will also be added to the FPC in order to maintain the balance of the committee and the Treasury will launch an appointment process for this position in due course
- bring the Bank within the purview of the National Audit Office, improving transparency and accountability for its use of resources
- further strengthen coordination arrangements between the Treasury and the Bank in protecting taxpayers and the wider economy from bank failures