TSC clashes with BoE on accountability plans

The Treasury Select Committee has criticised proposals by the Bank of England to increase accountability, saying they fall "well short" of what is needed.

Last week, in its response to the TSC's recommendations on the issue, the Bank proposed setting up an internal oversight committee to monitor and assess the processes employed in making financial stability policy decisions.

However, the committee wanted the proposed body to be able to assess performance in the prudential and monetary policy fields, something the Court of the Bank of England rejected as it would appear to take sides in the debate.

In today's response, the TSC said: "The Court's reference to the oversight committee's "taking sides" in the policy debate appears not to take full account of our recommendation that policy reviews should be conducted well after the event, precisely so as to avoid the risk of "second-guessing" of current policy."

The Committee also felt the response fell short on the ability to give the chancellor emergency powers in a crisis were public money is at risk.

The Bank said these powers would be encapsulated in a memorandum of understanding, although the committee insisted they should be made statutory through an amendment to the Financial Services Bill.

However, it did with agree with the idea of limiting governors to single, eight-year terms, as opposed to the current system of two five-year terms.

The Financial Services Bill, which is set to be published by the government at the end of January, will give the Bank additional macroprudential and supervisory powers through the Financial Policy Committee and Prudential Regulatory Authority.