Tyrie warns BoE accountability plans ‘fall short’

The Bank of England’s response to Treasury Select Committee’s calls for stronger oversight “falls short of what is needed”, Committee chairman Andrew Tyrie MP has said.

Mr Tyrie was responding to a report published by the Bank, which recommended the formation of an oversight committee of non-executive directors to ensure new policy undergoes due process before becoming official.

The new committee would be tasked with monitoring the activities of the Bank’s new financial stability watchdog, the Financial Policy Committee, but not those of the Monetary Policy Committee or the incoming Prudential Regulation Authority.

The Financial Services Bill sets out new powers and responsibilities for the BoE regarding monetary policy and financial stability policy decisions, including the introduction of the FPC and PRA as part of a new tripartite regime with the incoming Financial Conduct Authority.

Bank governor Sir Mervyn King said in the report: “Together, these differences will make it more difficult for an authority outside the Bank, like the Treasury Committee, to challenge and question individual financial stability policymakers.

“Because of this, court is of the view that an oversight committee for financial stability is needed within the Bank to supplement the direct accountability of the Bank to the Treasury Committee.”

However, Sir Mervyn added that “It is vital that the oversight committee does not seek to second guess the decisions of policymakers themselves.

“The passing of such judgements could threaten the relationship of trust that is necessary between policymakers and the oversight committee.”

In response to the Bank’s report, Mr Tyrie said: “The Bank of England’s response requires careful consideration. The Treasury Committee intends to produce a short report in time for consideration by the Chancellor before he publishes the Financial Services Bill at the end of the month.

“Whilst supporting some of the Committee’s recommendations, on several key points the Court of the Bank of England falls short of what is needed. “These points will be set out in the Committee’s report.”