The government's legislation aiming to overhaul financial regulation in the UK is "defective in a number of respects and needs a good deal of attention and improvement", Treasury committee chairman Andrew Tyrie has said.
As MPs debated the Financial Services Bill at
on 23 April 2011, the Conservative backbencher announced that his committee - bar one member - had agreed to table an amendment aiming to improve the legislation.
Mr Tyrie warned: "Under the bill, the governor of the Bank of England will be handed unprecedented new powers to shape the British economy.
"While continuing to set interest rates, the Bank will take over supervision of commercial banks and insurers, be responsible for tackling threats to financial stability and acquire the power to restrict lending on mortgages or order banks to increase their capital," he explained.
"One man or woman will wield all these powers, [making them] arguably as powerful as the chancellor. As currently drafted, the bill seems to fly in the face of all ideas of modern government, let alone parliamentary accountability."
Shadow Treasury minister Chris Leslie told MPs that Mr Tyrie's amendment had Labour's full support.
But Treasury Minister Mark Hoban said the government was prepared to look again at Bank of England scrutiny when the bill is considered in the House of Lords.
Mr Tyrie said he was reassured by this and withdrew his amendment, thereby ensuring there was no vote on it.
Under the terms of the bill four major changes will be made to the Bank:
- the Financial Policy Committee will be established to look after the general well-being of the UK financial system
- a new Prudential Regulation Authority will monitor the performance of banks and other companies that manage significant risks on their balance sheets
- the effective and fair functioning of markets will be enforced by the new Financial Conduct Authority
- the regulation of clearing houses will become the Bank's responsibility.
The chancellor of the exchequer will also be given the power to veto any decision by the Bank of England to bail out a bank which is in financial trouble.
The provisions of the bill will extend to the whole of the UK but the consent of the Scottish Parliament, the Welsh Assembly and the Northern Ireland Assembly will be needed before they can be fully implemented.