Commentary Part 1 – Bank of England Section 5 and Schedule 2: Further amendments relating to Bank of England
77.Section 5 introduces Schedule 2 to the Act. This amends the provisions of the BoE Act which relate to the Monetary Policy Committee and the court of directors and section 244 of the Banking Act 2009 (immunity).
78.Paragraph 1 of Schedule 2 amends Schedule 1 to the BoE Act which makes provision for the court of directors.
79.Paragraph 1(2) substitutes paragraph 1 of Schedule 1 to the BoE Act. The effect of the amendment is to provide that the Governor of the Bank is to serve a single term of 8 years. (Under the BoE Act currently, the Governor serves a term of office of 5 years and may be reappointed once.) Paragraph 1(15) specifies that this amendment does not affect any term of appointment that begins before the commencement of the amendment. New paragraph 1 of Schedule 1 to the BoE Act also provides that work in a post which is required by an enactment to be held by the Governor or Deputy Governor (for example, that of the chief executive of the PRA) is to be taken as work for the Bank (and so such work will not breach the requirement that the Governor and Deputy Governors work exclusively for the Bank). Paragraph 1(7) makes a consequential amendment to paragraph 6 of Schedule 1 to the BoE Act.
80.Paragraph 1(3) provides that the members of the court of directors who are not Bank executives are to be called “non-executive directors”. The term of appointment for non-executive directors of the Bank is to be 4 years or such shorter term as may be specified in the term of appointment (rather than 3 years). Paragraph 1(15) specifies that this amendment does not affect any term of appointment that began before the commencement of the amendment.
81.Paragraph 1(6) amends paragraph 5 of Schedule 1 to the BoE Act to provide that an officer or employee of the Bank, other than a person who is appointed by the Chancellor to be a member of the FPC, is disqualified for appointment to the court of directors. This amendment replaces the existing disqualification of a “servant of the Bank” for appointment as a director. The reference to “servant” is considered to be unusual and rather old fashioned, Paragraph 1(10) and paragraphs 2(6), 4 and 5 makes related amendments to references to “servants” in Schedule 1 to the BoE Act.
82.Paragraph 1(9)(c) ensures that the inability or unfitness of the Deputy Governor for prudential regulation to discharge the functions of being the chief executive of the PRA can be taken into account in considering his ability or fitness to be that Deputy Governor.
83.Paragraph 1(10)(d) clarifies that where an enactment expressly confers functions or imposes duties on the court of directors, the court of directors may not delegate those functions.
84.Paragraph 1(11) requires the Bank to publish a record of each meeting of the court of directors. The record must specify any decisions taken at the meeting (including decisions to take no action) and set out a summary of the court’s deliberations in relation to each decision. The record is to be published within 6 weeks of the meeting unless no meeting of the court has been held in that period whereupon the record is to be published within 2 weeks of the next meeting. This arrangement reflects the fact that the court of directors (which is expected to approve the record of each meeting prior to publication) generally meets once a month except in the summer when there is one month where no meeting is held.
85.Paragraph 1(12) provides that the Governor or Deputy Governor may not be designated to chair the court of directors or a sub-committee of court.
86.Paragraph 2 amends Schedule 3 to the BoE Act which makes further provision for the Monetary Policy Committee (“MPC”).
87.Paragraph 2(4) inserts a new paragraph 2B which allows the Chancellor to extend the term of appointment of a member appointed by the Chancellor to the MPC for up to 6 months. This might be appropriate to avoid a vacancy in cases where the person identified as a new member is unable to take up his post and a new recruitment exercise is required. Any period of extension under this provision is to be counted towards the person’s term if that person is reappointed to the MPC. Similar provision is made for members of the FPC who are appointed by the Chancellor in paragraph 3 of new Schedule 2A to the BoE Act.
88.Paragraph 2(5) amends paragraph 3 to require a member of the MPC who was appointed by the Chancellor who resigns to send a copy of his notice of resignation to the Treasury. This reflects the approach taken to a member of the FPC who has been appointed by the Chancellor under paragraph 4 of new Schedule 2A to the BoE Act.
89.Paragraph 2(7) inserts a new paragraph 5A to Schedule 3 to the BoE Act which prevents a member of the FPC who has been appointed by the Chancellor from being appointed by the Chancellor to the MPC.
90.Paragraph 3 amends section 244 of the Banking Act 2009 (immunity) to make clear that the Bank has immunity from liability in damages (save in specified cases) in relation to the exercise or purported exercise of its regulatory functions, including those relating to recognised clearing houses (under Part 18 of FSMA (recognised investment exchanges and clearing houses)) and recognised inter-bank payment systems (under Part 5 of the Banking Act 2009) and when exercising investigative functions under FSMA as a result of an appointment by the FCA or PRA under sections 97, 166 to 169, and 284 of FSMA.