July 24, 2014 8:50 pm

MPs seek reform of Bank of England oversight

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Anthony Habgood, chairman of the Bank of England’s court of directors

Anthony Habgood, chairman of the Bank of England’s court of directors

MPs have called for a review of the leadership of the Bank of England’s court of directors in two years. They are pushing for the court to take on a beefed-up role in holding the institution’s executive to account.

The Treasury committee said it approved the appointment of Anthony Habgood as the court’s new chairman, welcoming his pledges to undertake fundamental reform of the body and expressing confidence in his corporate experience.

But MPs warned that a reformed court would need a chairman with “considerable experience of prudential or financial matters”.

Mr Habgood chairs the media company Reed Elsevier and will step down as chairman of Whitbread, the pubs and restaurants group, at the end of August. His banking experience, however, is limited to a two-year stint at National Westminster Bank between 1998 and 2000 and he has no background in central banking.

Testifying to the committee last month, Mr Habgood said it was for others to judge whether someone with financial experience would be more suitable for the role.

MPs have been pushing for the court to take far more responsibility as it acts as a check on the power of the bank’s executives. It was accused of being ineffectual and deferential to the previous governor, Lord King.

Andrew Tyrie, the chairman of the Treasury committee, has led calls for the court to be replaced by a supervisory board of non-executives that could closely review the central bank’s performance and decisions.

As a compromise, the BoE in 2012 proposed the creation of a new “oversight committee” comprising non-executives from within the court with more power to police the executive.

Calls for stronger oversight of the central bank’s top brass follow reforms giving the institution more powers. In addition to its monetary policy role, the central bank also has responsibility for the prudential oversight of banks and insurers and has been amassing “macroprudential” tools to curb financial booms and busts.

Although Mr Habgood’s appointment to chair the court is for four years, the Treasury committee recommended on Thursday that the post be reviewed after two years.

“This would allow the chancellor to assess whether the job specification needs to be altered in the light of any changes in the governance structures of the Bank of England,” the committee said.

“If the court has by then been reformed into a proper board, along the lines recommended by this and other parliamentary committees, the requirements of the post of chairman will also change.”

Mr Tyrie said: “The Treasury committee has long called for fundamental reform of the Bank of England’s Byzantine governance – a mammoth task. It is encouraging that Mr Habgood largely agrees with the committee’s reform agenda. His task now is to play a leading role in securing a radical transformation of the court into a proper board.”

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