Bank bosses yesterday called for measures to rein in the powers of the Governor of the Bank of England before the Bank increases its grip on financial regulation next year.
At a Parliamentary committee scrutinising the draft Financial Services Bill, the chief executives of HSBC, Barclays and Royal Bank of Scotland were asked if they were concerned that Sir Mervyn King, the current Governor, was a "Sun King" figure.
Stuart Gulliver, the HSBC chief executive, said: "We would have concerns. You have the equivalent of a CEO who, for political reasons, is hired for five years and can't be fired and no real board that can check him or her. If this was a limited company on the Stock Exchange, would we be comfortable with that? I think the answer is we would be a bit uncomfortable with that."
Mr Gulliver said he was talking about the role of the Governor and not about any individual. He said the Bank's governing court, the equivalent of its board of directors, could be strengthened.
Bob Diamond, the Barclays chief executive, and Stephen Hester, the head of RBS, said that Mr Gulliver's comparison of the Bank with a public company was correct. Mr Diamond said: "There needs to be democratic accountability to Parliament, Number 10 and to the Chancellor."
Mr Gulliver also called for more outside members on the Bank's new Financial Policy Committee (FPC), which will monitor risk in the financial system. "The MPC [Monetary Policy Committee] has a mixture and the FPC should have a mixture." The bank bosses' remarks increase the pressure on the Bank over its governance and openness. Under the proposed Bill, the Financial Services Authority's scrutiny of market risk will be transferred to the Bank, increasing the Governor's already enhanced powers.
The Treasury Select Committee's chairman attacked the Bank on Monday for refusing to hand over minutes of court meetings that discussed the financial crisis. Andrew Tyrie said the bank had to be more accountable to Parliament and the public.
Sir Mervyn will give evidence to the committee tomorrow.
In a wide-ranging session with MPs and peers, Mr Diamond and Mr Hester disagreed over the cost of ring-fencing retail banking under reforms proposed by the Independent Commission on Banking.
Mr Diamond said the industry costs would be "at the low end" of the ICB's £4bn-£7bn estimate but Mr Hester said the range underestimated the real price.
"We consider it a done deal. We have to get on with life and do what we are told and that's what we are doing," Mr Hester said.
Bankers' Pay 'must not Link To Equity'
A member of the Bank of England's new Financial Policy Committee has urged banks to scrap returns on equity as a measure for deciding bonuses.
Robert Jenkins rejected bankers' claims that making them hold more equity, or shareholders' funds, would slash investor returns. Instead, he said, investors had worked out that low equity levels were risky and would reward safer banks with higher values. "In return for lower volatility, the market rewards the firm with a higher earnings multiple," Mr Jenkins said yesterday.
His views will add to pressure for banks to accept lower short-term returns in favour of stability. He called for targets to include more risk measures to reflect real value.