UK parliamentary review slams 'half-hearted' Bank of England reform

The Bank of England's governance structure remains "well short of what is expected in a modern institution", according to a UK parliamentary review that today called for an overhaul of the central bank's Court of Directors.

The UK Parliamentary Commission on Banking Standards says it is "essential" to strengthen the Bank of England's accountability following the creation of the Financial Policy Committee, Prudential Regulation Authority and the Financial Conduct Authority.

This, the commission said, requires the transformation of the structure and role of the Bank of England's Court of Directors – the body responsible for managing the central bank's affairs, except for the formulation of monetary policy.

The Treasury Committee – a separate parliamentary group – previously recommended that the "anachronistic" court be "transformed into a board effective enough to exercise meaningful governance".

Its members envisioned the revamped board conducting reviews of the central bank's prudential and monetary policy performance, and gaining the responsibility for providing information to Parliament and the Treasury.

"The reviews should, among other things, enable lessons for the future to be learnt, on which the Court should be expected to form a judgement," the committee said.

The UK government compromised on this recommendation, and created a new sub-committee of the Court – the Oversight Committee – with the power to commission retrospective reviews of the BoE's performance.

Today's report slammed this solution as "half-hearted at best", arguing that it "further complicates" the "already complex" lines of accountability at the central bank.

"It took constant pressure from Parliament to prompt the government and the Bank of England to concede even the unsatisfactory half-way house that is the Oversight sub-committee," the commission lamented.

Although the Court "could never fully replicate the functions of a private sector board" because it is not responsible for monetary policy, the commission said it should be reformed "as far as possible into a meaningful board".

The report also reiterated the call for the BoE to be "given a duty" to respond to reasonable reports for information from Parliament. "Although many institutions can examine what goes wrong in banks, only Parliament can hold regulators to account," the report said.

It should be noted that numerous central bank employees – including all of the most senior staff – appeared before the commission as it gathered information for this report; most appearing on multiple occasions.