MPs passed the Financial Services Bill, which makes sweeping changes to financial regulation in the UK, on 22 May 2012.
The bill will replace the so-called tripartite structure, introduced by the previous Labour government, under which oversight of the banking system is shared between the Bank of England, the Financial Services Authority (FSA) and the Treasury.
It will also give the chancellor the power to veto decisions made by the Bank of England when dealing with bank bailouts and other interventions.
It was introduced in the 2010-12 session of Parliament and a carry over motion - enabling it to complete its passage in the current session - was passed on 6 February 2012.
Under the terms of the bill, four major changes will be made to the Bank of England:
- 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.
Labour's Chris Leslie warned that there might be circumstances under which the aims of the Financial Policy Committee, which primarily focuses on financial stability, clashed with those of the Monetary Policy Committee, which mainly deals with inflation-targeting, but is also obliged to take growth into account when making decisions.
There may be a "mismatch" between boosting growth and promoting financial stability, he suggested.
Treasury Committee chairman and Conservative MP Andrew Tyrie said the bill was "defective in a number of respects".
The accountability of the Bank of England governor, who gains sweeping new powers under the bill, would be enhanced were Parliament to have a veto on the his or her appointment, he said.
He also criticised the government for "explicitly prohibiting" the Bank's board, or "court", from assessing how well the institution was meeting its objectives.
For the government, Treasury Minister Mark Hoban said the bill would "increase the accountability and transparency of the Bank".
"The structure we are proposing today will help to deliver better outcomes for consumers and to strengthen and improve the resilience of the financial system in the future," he concluded.
The bill now faces further scrutiny in the House of Lords.