BIS tells Bank of England to overhaul governance

The Government should consider changing the remit and make-up of the Bank of England's court of directors so that it can oversee the new Financial Policy Committee (FPC), the Bank for International Settlements told MPs yesterday.

The FPC will report to the governing court of directors but there is considerable overlap in membership, including the Bank's Governor Mervyn King.

Gavin Bingham, the secretary general of the committee on central bank governance at BIS, the Swiss-based central bankers' bank, told the Commons Treasury Select Committee he knew of "no precedent" for the court being involved in the decision making of the FPC.

Andrea Leadsom, a Conservative member of the committee, asked Mr Bingham if the Government needed to "re-look at the competencies and skills" of the court's members. Mr Bingham replied: "The simple answer is yes. If the responsibilities change, you have to make sure that the bodies are manned in the appropriate way.

On whether the court's remit might need to change to accommodate oversight of the FPC, Mr Bingham said: "I think that is precisely the sort of question your committee should consider."

The MPs were questioning Mr Bingham as part of their inquiry into governance at the Bank.

The Government's overhaul of regulation will give the Bank new powers but the Treasury Committee has expressed concern about the Bank's conduct and the court's ability to oversee the FPC.

Ms Leadsom asked Mr Bingham if it was "astonishing" that the court had not held an inquiry into the Bank's actions during the financial crisis. Unlike the Financial Services Authority, the Bank has not published a report into its actions during the credit crunch. Mr Bingham said: "I would have expected some form of evaluation, yes." Asked whether he had seen one, he replied: "No."

Mr Bingham added that the court had a majority of non-executive members and that he thought the proposed model would be "viable" for the UK.

Michael Cohrs, a member of the interim FPC, was appointed to the court yesterday.