Commentary Part 1 – Bank of England Section 3: Oversight Committee
24.Section 3 replaces section 3 of the BoE Act (which provided for there to be a sub-committee of the court of directors comprising of those members of court who are not Bank executives) with sections 3A to 3F. These provisions provide for the creation and functions of a new sub-committee of the court of directors to be known as the “Oversight Committee”.
25.New section 3A creates the Oversight Committee and provides that it is to consist of the non-executive directors of the Bank. Subsection (2) specifies that the functions of the Committee are to keep under review the Bank’s performance in relation to its objectives (including the duties of the FPC under section 9C) and the Bank’s strategy (including its financial stability strategy). The Committee is also to monitor the extent to which the objectives of the Bank in relation to its financial management have been met, keep under review the internal financial controls of the Bank and to carry out the specific functions specified in subsection (4) (which include keeping the procedures followed by the FPC and Monetary Policy Committee under review). Subsection (3) provides that the court of directors may arrange for the Oversight Committee to discharge additional functions.
26.New section 3B makes procedural provision for the Oversight Committee. It is to be chaired by the chair of court. The Committee may invite other persons to attend and speak at meetings of the Committee. The Committee may delegate any of its functions to two or more of its members. This might be used, for example, to ensure that members of the Oversight Committee who sit on the FPC as well as the court of directors are not involved in the assessment of the FPC’s performance. Subsection (5) makes specific provision for the handling of potential conflicts of interests of its members. Otherwise, subsection (2) provides that the Committee is to determine its own procedure.
27.New section 3C provides that the Oversight Committee may arrange for a review to be conducted in relation to any matter and for the review to result in a report. Subsection (2) makes it clear that the person appointed to conduct a review may be an officer or employee of the Bank, although in such cases subsection (4) provides that the consent of the Governor is required to the appointment. This is designed primarily to avoid a situation where the person appointed by the Oversight Committee is unable to undertake the review for any reason. Subsection (3) defines “performance review” as a review relating to past events and arranged in the discharge of the Committee’s functions of keeping under review the Bank’s performance in relation to its objectives (including the FPC’s duty under section 9C) or the Bank’s strategy, or monitoring the extent to which the objectives of the court of directors in relation to the Bank’s financial management have been met. Subsection (5) provides that in relation to a performance review, the Committee must have regard to the desirability of ensuring that sufficient time has elapsed for the review to be effective and to avoid the review adversely affecting in a material way the exercise by the Bank of its functions.
28.New section 3D deals with the reports of performance reviews. Subsection (1) provides that the Bank must give the Treasury a copy of any such report. Subsection (2) requires the Bank to publish the report unless the court of directors considers that publication would be against the public interest. Where publication is delayed, the court of directors must keep under consideration whether publication of the information would still be against the public interest and publish the report when the court of directors is satisfied that non-publication is no longer appropriate. Subjection (6) provides that the Treasury must lay before Parliament a copy of any report that the Bank has published under this section. This applies whether the report is published immediately, or later once the risk to the public interest has passed.
29.New section 3E provides that the Oversight Committee is to monitor the Bank’s response to a report of a review arranged under section 3C and, where the Bank accepts the recommendations of such a report, monitor the implementation by the Bank of the recommendations.
30.New section 3F provides that the Oversight Committee is to have access to the papers of the FPC and Monetary Policy Committee. Subsection (2) provides that up to two members of the Oversight Committee may attend any meeting of the FPC or Monetary Policy Committee although such persons may only speak at the meeting if invited to do so by the chair.
31.Subsections (3) and (4) of section 3 make amendments to the BoE Act consequential on the abolition of the committee provided for by section 3 of the BoE Act and the creation of the Oversight Committee.