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Clause 1 - Deputy Governors

Part of Financial Services Bill – in a Public Bill Committee at 10:30 am on 21st February 2012.

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Photo of Chris Leslie Chris Leslie Shadow Minister (Treasury) 10:30 am, 21st February 2012

These amendments address clause 1, which makes a set of changes to the provisions in the Bank of England Act 1998—as I have said, we do not have that in the Committee Room—particularly in relation to the composition of the court of the Bank of England and the deputy governors appointed to that court.

Amendment 1 would change the name of the governing body of the Bank of England from “court of directors” to “Supervisory Board”. It is an important amendment, given the debates that took place in the Treasury Select Committee in particular, as well as in the pre-legislative scrutiny Committee. The court of directors of the Bank is a structure that has a great deal of history. It is an old institution, established in a different era from the one we are living in. It started its life in 1694, when the Bank of England was the Government’s banker and debt manager. At that time, it had 17 clerks and two gatekeepers, but it has since grown in size and employs many more staff, who have included the hon. Member for West Suffolk. He has extensive experience of working at all levels in the Bank, and I am sure he will bring that to the fore in our scrutiny of the Bill.

The court of the Bank of England was also established in 1694, when its functions were essentially to declare the dividend and to conduct elections, but its role has obviously changed since that time. Following the second world war, the Bank of England Act 1946 set out the duties of the court as the governing board of the Bank. Under the previous Government, the 1998 Act changed the governance of the Bank and the role of the court, and those arrangements again evolved under the 2009 Act.

Just as the events and circumstances of the past 300 years or so have done, so the Bill will shape and influence the role, composition and responsibilities of the Bank and the court. Amendment 1 would replace the relevant words in line 5 with the phrase:

“There shall continue to be a court of directors of the Bank but it shall be renamed the Supervisory Board of the Bank of England.”

The Treasury Committee made a series of recommendations, and it is a pity that the Government did not pick them up and reflect them in drafting the Bill.

It is important that hon. Members recognise the context of the amendment. The Bill provides for significant rule-making powers to be handed to the Financial Policy Committee and, indirectly, the Governor of the Bank of England. The FPC will be able to make rules and give instructions to the new Prudential Regulation Authority and Financial Conduct Authority. Very considerable powers will be transferred to the Bank, and it is therefore important that there are stronger supervisory functions and arrangements within the Bank to ensure that it has proper checks and balances on the execution of those powers and that, if necessary, appropriate challenge is given. That is the normal situation in large public—let alone private—institutions and, as recommended by the Treasury Committee, such improvements should be made to the arrangements for internal challenge and scrutiny so that there can be a proper assessment of the Bank’s performance and rules.