Bank of England and Financial Services Bill [HL] — House of Lords, 2015-11-09
Topic: Domestic Commerce
John Kevin Sharkey (Liberal Democrats, Centre to centre-left): My Lords, I start by thanking the Minister and his officials for meeting us to discuss the provisions in the Bill. It was helpful and I look forward to further meetings between Committee and Report. The purpose of the amendment is to set the number of non-executive directors of the court of the Bank to nine. The helpful Treasury briefing note to the Bill is a little ambiguous in this area. It states on page 1 that, alongside these changes, the number of NEDs on the court will be reduced from nine to seven, although the legislation will leave flexibility for up to nine NEDs. But as far as I can see, there is no measure in the Bill to reduce the number of NEDs from nine to seven. I understand that this reduction is within the gift of the governor, who has simply decided that the number should be seven and not nine. As far as I know, there has been no consultation on this measure According to the Bank’s website as of this afternoon, the court has four executive members and nine non-executive members. The governor proposes to reduce the number of non-execs to seven, while at the same time the Bill proposes to increase the number of Bank officials on the court from four to five. Together, this would radically change the composition of the court. As I say, at the moment the court consists of four Bank officials and nine NEDs. The new structure would mean that there are five Bank officials and seven NEDs. This seems unsatisfactory and possibly even dangerous. The Bank’s tendency to groupthink is well known, and of course the Bank is famous for its intellectual humility and capacity for self-doubt. It is important that the tendency to groupthink and arrogance is resisted. The last two financial services Acts gave much more power to the governor than to the Bank but, at the same time, they provided for more robust oversight. The officials/non-executive director balance on the board is a critical part of that. It is absolutely critical if the court succeeds, later in the Bill, in abolishing the oversight committee and assigning its functions to the court itself, which I hope it will not. We will look at that later I pressed the Minister at Second Reading, and in a subsequent meeting, to explain why the number of non-executive directors is to be reduced, and I have had no real answer. I have heard something about administrative convenience and transition arrangements, whatever they may be, but that is certainly not a proper answer. I again ask the Minister why the number of non-executive directors on the court is being reduced A lot in the Bill seems to be aimed at reducing the influence of non-executive directors, and we will come to discuss the composition of the various sub-committees. A lot in the Bill seems aimed at reducing external influence on the Bank’s processes and deliberations. There is also a lot in the Bill that weakens the supervisory regime that the Bank is charged with enforcing, and we will come to all that. For now, our amendment seeks to maintain the balance of NEDs and officials on the court of the Bank. That is obviously vital if we are to avoid a repetition of groupthink and introspective and arrogant behaviour. The Bank will have five officials on the court—one more than it has now. We need to retain nine non-executive directors to be certain of strong, uncaptured, independent voices on the court. I beg to move.