Mervyn King at odds with TSC

The Bank of England’s governor, Sir Mervyn King, has rejected MPs’ calls for a new supervisory board to monitor the BoE.

MPs’ calls for a new supervisory board to monitor the Bank of England (BoE) have been rejected by the BoE’s governor, Sir Mervyn King.

The Treasury Select Committee (TSC) has produced a report into the BoE’s accountability which called for a veto over the appointment of future Bank governors and for its court to be reformed.  Speaking at a TSC hearing yesterday, Mervyn King agreed that although some new accountability measures were needed in some areas there was no need for an overhaul of the BoE’s court, which functions as its board.

Mervyn King has proposed that an oversight committee should be set up to periodically review decisions made by the Financial Policy Committee, but that this committee would sit beneath the Court.  In written evidence, Mervyn King and David Lees, the court chairman, said that the new oversight committee should in no way second guess policymakers.

The BoE’s submitted document suggests that the oversight committee should occasionally report on the BoE’s financial stability decisions and commission reports by external experts.  The submitted evidence states: “This committee should assess whether the process employed in making financial policy decision have considered a full range of options and have taken reasonable account of the relevant information, analysis, differing views among policy makers and challenges from outside the bank.”

The TSC chair, Andrew Tyrie, has already indicated that the committee will challenge the BoE’s proposal for not going far enough and that the TSC will publish a response to the Bank’s proposal in time for the Chancellor to consider before he publishes the financial services bill, which will provide the new set up.  Tyrie stated that “Whilst supporting some of our recommendations, on several key points the Court of the Bank falls short of what is needed.”

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