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I will return to the use of the indefinite article, to illustrate why it might be appropriate for the hon. Member for Leeds North East to be a governor of the Northern School of Contemporary Dance but not necessarily to be the Governor of the Bank of England. We all agree that the court of the Bank needs to evolve as the functions of the Bank do so, and I shall set out how that will be achieved after I have dealt with the amendments.
In their response to the Treasury Committee’s report on the “Accountability of the Bank of England”, the Government made it clear that we do not agree that the name of the court needs to be changed. The court has expressed reservations about the implications of using the term “supervisory board”. It has argued that it is not a supervisory board, as currently recognised, and that to rename it would cause confusion.
The more substantive and important questions are what role the court should have and how it is equipped and qualified to carry out its functions. The Treasury Committee’s report is clear about that and it makes several recommendations about how to enhance the court’s role as the governing body of the Bank of England and improve its accountability. There is consensus that the governance of the Bank needs to be strengthened to equip it better for the new roles it will be given by the Bill. The court has clearly acknowledged that need, stating that:
“The new responsibilities for the Bank of England in the area of financial stability will need to be accompanied by new accountability mechanisms.”
The court has been responsible for managing the affairs of the Bank since it was first nationalised in 1946. Subsequent legislation such as the Bank of England Act 1998 and the Banking Act 2009 have effected changes to the constitution and duties of the court. While the court is long established, it has evolved in both its function and its composition.
The changes being brought about in the Financial Services Bill herald a new era for the Bank: creating both the FPC and the Prudential Regulation Authority within the Bank of England group, enhancing the Bank’s responsibilities and giving it the tools and powers it needs to regulate effectively the stability of the financial services sector. As it has done with previous changes, the court will need to adapt and evolve to continue operating as an effective governing body that can oversee the transition to the new arrangements, as well as ensuring that the Bank is properly resourced to meet its new responsibilities, offering challenge to the executive and, importantly, accountability to Parliament.
To that end, in January, the court published its own response to the Treasury Committee’s recommendations. The court’s paper set out positive and constructive proposals to strengthen its oversight of the Bank’s financial stability activities and to enhance accountability. Chief among them is the creation of a new oversight committee for financial stability, which will be a sub-committee of the court with the remit of covering the entirety of the Bank’s financial stability activities. That wholly non-executive committee will have access to the meetings and papers of the Bank’s policy-making committees, including the FPC, and will be able both to review internal processes and commission periodic reviews of policy-making performance from expert external authorities. Those reports will be published, as will the minutes of the court’s meetings.
The court’s response signals important improvements to the transparency and accountability of the court, as well as a commitment to effective governance practices.