Bank of England and Financial Services Bill (HL Bill 65)

A

BILL

TO

Make provision about the Bank of England; to make provision about the
regulation of financial services; to make provision about the issue of
banknotes; and for connected purposes.

Be it enacted by the Queen’s most Excellent Majesty, by and with the advice and
consent of the Lords Spiritual and Temporal, and Commons, in this present
Parliament assembled, and by the authority of the same, as follows:—

Part 1 The Bank of England

Governance

1 Membership of court of directors

(1) 5The Bank of England Act 1998 is amended as follows.

(2) In section 1(2) (court of directors) after paragraph (b) insert—

(ba) a Deputy Governor for markets and banking,”.

(3) After section 1 insert—

1A Power to alter membership of court of directors

(1) 10The Treasury, after consulting the Governor of the Bank, may by order
amend the list in section 1(2) so as to—

(a) alter the title of a Deputy Governor;

(b) add a Deputy Governor to the list;

(c) remove a Deputy Governor from the list.

(2) 15An order under subsection (1)(a) or (c) must (by making saving
provision or otherwise) secure that the alteration in the title of a Deputy
Governor or the removal of a Deputy Governor from the list in section
1(2) does not have effect in relation to the individual (if any) who holds
that office at the time the order is made.

Bank of England and Financial Services BillPage 2

(3) An order under subsection (1)(b) may also add the Deputy Governor to
which the order relates to the list in—

(a) section 9B(1) (membership of Financial Policy Committee);

(b) section 13(2) (membership of Monetary Policy Committee);

(c) 5section 30A(2) (membership of Prudential Regulation
Committee).

(4) An order under subsection (1)(c) may also remove from any of those
lists the Deputy Governor to which the order relates.

(5) Where an order under subsection (1) makes an amendment mentioned
10in column 1 of the following table, it may also make the amendment
mentioned in the corresponding entry in column 2 of the table.

Addition or removal of Deputy
Governors
Corresponding change in
membership of Committee
Addition of one or more
Deputy Governors to the list
in section 9B(1)
Equal increase in the number
15of members appointed by the
Chancellor of the Exchequer
under section 9B(1)(e)
Removal of one or more
Deputy Governors from the
list in section 9B(1)
Equal reduction in the
number of members
20appointed by the Chancellor
of the Exchequer under
section 9B(1)(e)
Addition of one or more
Deputy Governors to the list
in section 13(2)
Equal reduction in the
number of members
25appointed by the Governor of
the Bank under section
13(2)(b)
Removal of one or more
Deputy Governors from the
list in section 13(2)
Equal increase in the number
of members appointed by the
30Governor of the Bank under
section 13(2)(b)
Addition of one or more
Deputy Governors to the list
in section 30A(2)
Equal increase in the
minimum number of
members appointed by the
35Chancellor of the Exchequer
under section 30A(2)(g)
Removal of one or more
Deputy Governors from the
list in section 30A(2)
Equal reduction in the
minimum number of
members appointed by the
40Chancellor of the Exchequer
under section 30A(2)(g)

(6) The power in subsection (5)

(a) to make an equal reduction in the number of members
appointed under section 9B(1)(e), 13(2)(b) or 30A(2)(g), includes
45power to remove the power to make those appointments where

Bank of England and Financial Services BillPage 3

an equal reduction would reduce the number of members so
appointed to zero,

(b) to make an equal increase in the number of members appointed
under section 9B(1)(e), 13(2)(b) or 30A(2)(g), includes power to
5reinstate the power to make those appointments where it has
previously been removed under paragraph (a).

(7) An order under subsection (1) may amend, repeal or revoke any
provision made by or under any Act, including this Act, so as to make
consequential provision.”

2 10Term of office of non-executive directors

(1) Paragraph 2 of Schedule 1 to the Bank of England Act 1998 (term of office of
non-executive directors) is amended as follows.

(2) The existing text becomes sub-paragraph (1).

(3) After that sub-paragraph insert—

(2) 15If it appears to Her Majesty that in the circumstances it is desirable to
do so, Her Majesty may, before the end of the term for which a
person is appointed as non-executive director, extend the person’s
term of office on one occasion for a specified period of not more than
6 months.

(3) 20If a person whose term of office is extended under sub-paragraph (2)
is subsequently re-appointed as non-executive director—

(a) the length of the term of his or her re-appointment (or, if the
person is re-appointed more than once, of the first re-
appointment following the extension) is to be reduced by a
25period equal to the extension, but

(b) the term of that re-appointment may itself be extended under
sub-paragraph (2).”

3 Abolition of Oversight Committee

(1) The Bank of England Act 1998 is amended as follows.

(2) 30In section 2(2) (functions of court of directors)—

(a) the words from “determining the Bank’s objectives” to the end become
paragraph (a);

(b) after that paragraph insert—

(b) the functions mentioned in section 3A(2) (the “oversight
35functions”).”

(3) In section 3A (Oversight Committee)—

(a) omit subsection (1);

(b) in subsection (2), in the words before paragraph (a) for “functions of the
Oversight Committee” substitute “oversight functions of the court of
40directors”;

(c) in subsection (2)(d) for “Oversight Committee” substitute “court of
directors”;

(d) omit subsection (3);

Bank of England and Financial Services BillPage 4

(e) in the heading for “Committee” substitute “functions of court of
directors”.

(4) Omit section 3B (Oversight Committee: procedure).

4 Functions of non-executive directors

(1) 5Schedule 1 to the Bank of England Act 1998 (court of directors) is amended as
follows.

(2) In paragraph 11 (powers)—

(a) in sub-paragraph (2) for “this paragraph” substitute “sub-paragraph
(1)”;

(b) 10after sub-paragraph (2) insert—

(3) The oversight functions of the court of directors (as defined
by section 3A(2)) may be delegated to a sub-committee of the
court consisting of 2 or more non-executive directors of the
Bank.”

(3) 15In paragraph 14 (remuneration)—

(a) at the beginning insert—

(A1) The remuneration of the Governor and Deputy Governors of
the Bank is to be determined by a sub-committee of the court
of directors consisting of 2 or more non-executive directors of
20the Bank.”;

(b) in sub-paragraph (1) for “the Oversight Committee” substitute “that
sub-committee”.

5 Financial stability strategy

(1) Section 9A of the Bank of England Act 1998 (financial stability strategy) is
25amended as follows.

(2) In subsection (1), in the words before paragraph (a), for “court of directors”
substitute “Bank”.

(3) In subsection (2), in the words before paragraph (a)—

(a) for “the Bank’s” substitute “its”;

(b) 30for “court of directors” substitute “Bank”.

(4) In subsection (3) for “court of directors” substitute “Bank”.

(5) Omit subsection (4).

(6) In subsection (5)—

(a) for “court of directors” substitute “Bank”;

(b) 35for “the Bank’s” substitute “its”.

(7) In subsection (6)—

(a) after “strategy was” insert “first”;

(b) for “(4)” substitute “(1)”.

Bank of England and Financial Services BillPage 5

6 Financial Policy Committee: status and membership

(1) Section 9B(1) of the Bank of England Act 1998 (Financial Policy Committee) is
amended as follows.

(2) In the words before paragraph (a), for “sub-committee of the court of directors”
5substitute “committee”.

(3) For paragraph (b) substitute—

(b) the Deputy Governor for financial stability,

(ba) the Deputy Governor for markets and banking,

(bb) the Deputy Governor for monetary policy,

(bc) 10the Deputy Governor for prudential regulation,”.

(4) In paragraph (e) for “4” substitute “5”.

7 Monetary Policy Committee: membership

(1) Section 13 of the Bank of England Act 1998 (Monetary Policy Committee) is
amended as follows.

(2) 15In subsection (2)—

(a) after paragraph (aa) insert—

(aaa) the Deputy Governor for markets and banking,”;

(b) in paragraph (b) for “2 members” substitute “one member (to be known
as the Chief Economist of the Bank)”.

(3) 20For subsection (3) substitute—

(3) The member appointed under subsection (2)(b) shall be a person who
carries out monetary policy analysis within the Bank.”

(4) For subsection (4) substitute—

(4) Before appointing a person under subsection (2)(c) the Chancellor of
25the Exchequer must—

(a) be satisfied that the person has knowledge or experience which
is likely to be relevant to the Committee’s functions, and

(b) consider whether the person has any financial or other interests
that could substantially affect the functions as member that it
30would be proper for the person to discharge.”

8 Monetary Policy Committee: procedure

(1) The Bank of England Act 1998 is amended as follows.

(2) In section 15(1) (publication of Monetary Policy Committee minutes: usual
rule)—

(a) 35for “After” substitute “As soon as reasonably practicable after”;

(b) omit the words from “before” to the end.

(3) In section 15(3) (publication of Monetary Policy Committee minutes: special
cases)—

(a) for “before the end of the period of 6 weeks beginning with the day of”
40substitute “as soon as reasonably practicable after”;

Bank of England and Financial Services BillPage 6

(b) for “before the end of the period of 6 weeks beginning with the day on
which” substitute “as soon as reasonably practicable after”.

(4) In paragraph 10 of Schedule 3 (meetings of Monetary Policy Committee)—

(a) in sub-paragraph (1) for “once a month” substitute “8 times in each
5calendar year”;

(b) after sub-paragraph (1) insert—

(1A) The Committee shall meet at least once in any 10 week
period.”

(5) In paragraph 11 of Schedule 3 (proceedings of Monetary Policy Committee:
10quorum)—

(a) in sub-paragraph (2) for “whom” to the end substitute whom—

(a) one must be the Governor of the Bank or the Deputy
Governor for monetary policy,

(b) unless both those mentioned in paragraph (a) are
15present, one must be either the Deputy Governor for
financial stability or the Deputy Governor for markets
and banking.”;

(b) in sub-paragraph (6) after “(5)” insert “and paragraph 13B”.

(6) In Schedule 3, after paragraph 13A insert—

13B (1) 20If a member of the Committee (“M”) has any direct or indirect
interest (including any reasonably likely future interest) in any
dealing or business which falls to be considered by the Committee—

(a) M must disclose that interest to the Committee when it
considers the dealing or business, and

(b) 25the Committee must decide whether M is to be permitted to
participate in any proceedings of the Committee relating to
any question arising from its consideration of the dealing or
business, and if so to what extent and subject to what
conditions (if any).

(2) 30The Bank must issue and maintain a code of practice describing how
members of the Committee and the Committee are to comply with
sub-paragraph (1).

(3) The Bank may at any time revise or replace the code.

(4) Before issuing, revising or replacing the code, the Bank must consult
35the Treasury.

(5) The Bank must publish the current version of the code in whatever
manner it sees fit.

(6) The Committee must comply with the code when taking decisions
under sub-paragraph (1)(b).”

Bank of England and Financial Services BillPage 7

Financial arrangements

9 Audit

In the Bank of England Act 1998, after section 7 insert—

7ZA Audit: role of Comptroller and Auditor General

(1) 5Before appointing an auditor or auditors under section 7(5), the Bank
must consult the Comptroller and Auditor General (“the
Comptroller”).

(2) The auditor or auditors appointed by the Bank must consult the
Comptroller on the scope, timing and direction of the audit and on any
10audit plan (or any material revisions to an audit plan).

(3) The Comptroller—

(a) has a right of access at any reasonable time to any document
relating to the audit of the Bank’s accounts which the
Comptroller may reasonably require, and

(b) 15may require any person holding or accountable for any such
document to provide such information and explanation as are
reasonably necessary.

(4) Subsection (3) applies only to documents in the custody or under the
control of the Bank.

(5) 20An obligation imposed on a person as a result of the exercise of the
powers conferred by subsection (3) is enforceable by injunction or, in
Scotland, by an order for specific performance under section 45 of the
Court of Session Act 1988.

(6) The Comptroller (or a person nominated by the Comptroller) may
25attend any proceedings of the Bank’s audit committee which are
concerned with the audit of the Bank’s accounts.

(7) The “Bank’s audit committee” means the committee or sub-committee
within the Bank for the time being having responsibilities relating to
the audit of the Bank’s accounts.”

10 30Activities indemnified by Treasury

In the Bank of England Act 1998, after section 7A insert—

7B Reports on Bank activities indemnified by Treasury

(1) This section applies where the Treasury give an indemnity or guarantee
to the Bank in respect of an activity or series of activities undertaken by
35the Bank.

(2) The Treasury may direct the Bank to prepare a financial report in
relation to the activity or series of activities to which the indemnity or
guarantee relates.

(3) A direction under subsection (2) may include directions as to—

(a) 40the financial years for which a report is to be prepared,

(b) the information to be contained in the report and the manner in
which it is to be presented, and

Bank of England and Financial Services BillPage 8

(c) the methods and principles according to which any statement of
financial information to be contained in the report is to be
prepared.

(4) A direction under subsection (2) may be revoked by a further direction.

(5) 5The Bank must send any report that it prepares under subsection (2) to
the Treasury.

(6) The Treasury may send the report to the Comptroller and Auditor
General (“the Comptroller”) for review.

(7) The review is to consider such matters as may be agreed between the
10Comptroller and the Treasury.

(8) The Comptroller—

(a) has a right of access at any reasonable time to any document the
Comptroller may reasonably require for the purposes of the
review, and

(b) 15may require any person holding or accountable for any such
document to provide such information and explanation as are
reasonably necessary.

(9) Subsection (8) applies only to documents in the custody or under the
control of—

(a) 20the Bank;

(b) the auditor or auditors appointed by the Bank under section
7(5).

(10) An obligation imposed on a person as a result of the exercise of the
powers conferred by subsection (8) is enforceable by injunction or, in
25Scotland, by an order for specific performance under section 45 of the
Court of Session Act 1988.

7C Accounts of Bank companies carrying on activities indemnified by
Treasury

(1) This section applies where the Treasury give an indemnity or guarantee
30to a company (“the company”) in which the Bank has an interest, in
respect of an activity or series of activities undertaken by the company.

(2) The Treasury may direct the company to send to the Comptroller and
Auditor General (“the Comptroller”) accounts prepared by it in
accordance with the Companies Act 2006 and any direction given by
35the Bank under section 7A(1).

(3) A direction given under subsection (2)

(a) may relate to all financial years, or to financial years specified in
the direction;

(b) may be revoked by a further direction.

(4) 40Where a direction given under subsection (2) has effect in relation to a
financial year, the company is exempt from the requirements of Part 16
of the Companies Act 2006 (audit) for that financial year, and its
balance sheet must include a statement to that effect.

(5) The Comptroller must examine any accounts sent to the Comptroller
45under this section with a view to satisfying himself or herself that the

Bank of England and Financial Services BillPage 9

accounts have been properly prepared in all material respects in
accordance with the bases of preparation identified in the accounts.

(6) After completing the examination the Comptroller must—

(a) certify the accounts and issue a report,

(b) 5send the certified accounts and the report to the Treasury, and

(c) if not satisfied that the accounts have been properly prepared in
all material respects in accordance with the bases of preparation
identified in the accounts, report to the House of Commons.

(7) The Treasury must lay the copy of the certified accounts and the report
10before Parliament.

(8) For the purposes of this section, the Bank has an interest in a company
if—

(a) the Bank, or a nominee of the Bank, is a member of the
company, or

(b) 15the company is a subsidiary undertaking of the Bank, within the
meaning of section 1162 of the Companies Act 2006.”

11 Examinations and reviews

In the Bank of England Act 1998, after section 7C (inserted by section 10)
insert—

7D 20Examination by Comptroller and Auditor General

(1) The Comptroller and Auditor General (“the Comptroller”) may carry
out examinations into the economy, efficiency and effectiveness with
which the Bank has used its resources in discharging its functions.

(2) An examination under this section may be limited to such functions of
25the Bank (however described) as the Comptroller considers
appropriate.

(3) An examination under this section is not to be concerned with the
merits of the Bank’s general policy in pursuing the Bank’s objectives.

(4) Before carrying out an examination under this section, the Comptroller
30must consult the court of directors of the Bank.

(5) The Comptroller may report to the House of Commons the results of
any examination carried out by the Comptroller under this section.

(6) Section 6 of the National Audit Act 1983 (Comptroller may carry out
economy, efficiency and effectiveness examinations) does not apply to
35the Bank.

7E Examination by Comptroller and Auditor General: supplementary

(1) This section applies if the court of directors of the Bank is of the opinion
that an examination under section 7D, or any part of it, is concerned
with the merits of the Bank’s general policy in pursuing the Bank’s
40objectives.

(2) The court must notify the Comptroller that it is of that opinion, and give
the reasons.