MPs urge 'full parliamentary scrutiny' of new financial regulators

The Treasury Select Committee has proposed that it be given an "effective veto" over future appointments of governor of the Bank of England and chief executive of the Financial Conduct Authority (FCA). The committee's chair, Conservative MP Andrew Tyrie, has put forward an amendment to the Bank of England and Financial Services Bill which would implement this change in relation to the chief executive of the FCA, subject to the parliamentary process.

"More of the most powerful appointments ... should be subject to full pre-appointment scrutiny," Tyrie said, as the committee published its latest report. "The government continues to disagree, appealing to the 'market sensitivity of these appointments. That is not an adequate explanation."

"The time has come to entrench the independence of the post of the chief executive of the FCA. On behalf of the Treasury Committee, I have tabled an amendment to the Bank of England and Financial Services Bill to give this effect. The chief executive of the FCA should be able to operate with the confidence that he or she cannot be dismissed without parliament's - the Treasury Committee's - approval. The public, too, need to have confidence that the government is not interfering with independent supervisors and regulators," he said.

In its report, the Treasury Committee said that its role approving the appointment and dismissal of the head of the Office of Budget Responsibility (OBR) provided an "appropriate precedent" for its recommendation. The committee's role in the process means that OBR head Robert Chote is both independent of government and perceived as such by the public, so reinforcing the credibility of the economic forecasts used by the chancellor during his annual Budget and Autumn Statement.

The Bank of England and Financial Services Bill, which is currently before the UK parliament, contains measures to improve the central bank's accountability and to strengthen coordination between it and the government in the event of future economic instabilities. It would bring the Prudential Regulation Authority within the Bank, ending its status as a subsidiary, and establishing a new Prudential Regulation Committee (PRC) within the Bank as a new Prudential Regulation Committee (PRC), ending its status as a subsidiary; and give public spending watchdog the National Audit Office (NAO) oversight of the way the bank is run.

In its report, the committee said that it intended to hold "appointment hearings" for those who would sit on the PRC, something which it already does for appointments to the Financial Policy Committee (FPC) and Monetary Policy Committee (MPC). It intends to use "the same criteria of personal independence and professional competence" as it currently uses for MPC and FPC appointments in relation to PRC appointments, according to the report.

Financial regulation expert Michael Ruck of Pinsent Masons, the law firm behind Out-Law.com, said that the Treasury Committee's report "may in some circles be interpreted as illustrating frustration on the recent appointment of the new FCA chief executive and the lack of 'independence' around this appointment". Bank of England deputy governor Andrew Bailey was appointed by the chancellor in January, and is due to take up the position in July.

"Most people would expect the chief executive of the FCA to seek to act independently of Treasury or parliamentary influence," Ruck said. "However, whilst this role does require some independent oversight and challenge, as illustrated over previous years, care should be taken to ensure it does not become a political football for parliament, the Bank of England and Treasury Select Committee."