Opinion of the European Monetary Institute at the request of the United Kingdom under Article 109f (6) of the Treaty establishing the European Community (the “Treaty”) and Article 5.3 of the Statute of the EMI concerning certain subordinate legislation in connection with the Bank of England Act 1998 (CON/98/24)
Date: 1998-05-08
Institutions: European Monetary Institute
Subjects: United Kingdom, data collection, monetary policy, national law, statistics

OPINION OF THE EUROPEAN MONETARY INSTITUTE

8 May 1998

at the request of the United Kingdom under Article 109f (6) of the Treaty establishing the
European Community (the “Treaty”) and Article 5.3 of the Statute of the EMI concerning

certain subordinate legislation in connection with the Bank of England Act 1998

(CON/98/24)

1.

On  21  April  1998  the  EMI  received  from  the  Bank  of  England  a  request  for  an  opinion  on

certain  subordinate  legislation  proposed  to  be  made  by  way  of  Orders  of  HM  Treasury  in

connection with the Bank of England Act 1998 and under authority deriving from that Act (“the

Orders”). The orders are the Cash Ratio Deposits (Value Bands and Ratios) Order 1998, The

Cash  Ratio  Deposits  (Eligible  Liabilities)  Order  1998,  The  Bank  of  England  (Information

Powers)  Order  1998,  and  The  Bank  of  England  Act  1998  (Consequential  Amendments  of

Subordinate Legislation) Order 1998.

2.

The EMI’s competence to deliver an opinion is based on Article 1.1, second and fifth indents, of

the  Council  Decision  of  22  November  1993  (93/717/EC)  (the  “Council  Decision”)  on

consultation of the EMI by the authorities of the Member States on draft legislative provisions, as

the  Orders  contain  inter  alia  provisions  concerning  the  powers  of  the  Bank  of  England  (the

“Bank”)  and  rules  applicable  to  financial  institutions  in  so  far  as  they  influence  the  stability  of

financial institutions and markets.

3.

The  EMI  has  already  given  detailed  comments  on  the  then  current  provisions  of  the  Bank  of

England Bill in its opinion CON/97/27 dated 21 January 1998. Since the Orders are intended to

implement certain parts of that legislation, no new comments of principle arise. Reference should

be made, however, to the EMI’s earlier opinion for the EMI’s comments on the matters which

three of the orders cover, namely cash ratio deposits and the collection of information.

4.

In particular, it was noted in the earlier opinion as follows.

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a)

The provisions relating to cash ratio deposits are established as part of the arrangements

for  financing  the  Bank.  Whilst  the  EMI  acknowledges  that  they  are  not  intended  to  be

used as a monetary policy instrument, it notes that the holding of minimum reserves might

be a monetary policy instrument in Stage Three and that such cash ratio deposits might in

the future need to be reviewed accordingly.

b)

The Bank of England Act empowers HM Treasury to determine what statistical data will

be  reported  to  the  Bank  for  monetary  policy  purposes.  Such  a  right  may  be  inconsistent

with Article 5 of the Statute of the ESCB and ECB, which requires the ECB, assisted by

the national central banks, to collect the statistical information necessary for the ESCB to

carry out its tasks. This Article 5 applies to the United Kingdom notwithstanding its status

under the Treaty. However, the EMI notes that the proposed range of the financial affairs

of an undertaking about which the Bank will be empowered to obtain information are very

comprehensively drafted in the relevant Orders.

5.

The EMI has no objection to its opinion being made public.

8 May 1998