58/98
23 April 1998
BANK OF ENGLAND ACT 1998
The Bill, which establishes the Bank of England Monetary Policy Committee and transfers banking supervision from the Bank of England to the Financial Services Authority received Royal Assent today.
The Bank of England Act 1998, gives effect to the policy changes announced by the Chancellor Gordon Brown in May 1997 when he announced a new framework for monetary policy and the transfer of banking supervision. The Act also puts in place a new accountability framework for the Bank, and greater transparency in the Bank's operations.
Welcoming the swift passage of the legislation, the Chief Secretary Alistair Darling said:
"Less than a year after taking office, the Government has put in place the most far reaching changes the Bank has seen in centuries.
"The Bank of England Act is a keystone in modernising Britain's economy and creating a modern bank ready for the 21st century.
"The Act puts in place a new framework which will promote economic stability and give a long-term focus to monetary policy.
"It maximises openness and transparency and ensures that the Bank is fully accountable and that its conduct of monetary policy meets the economic needs of the nation."
The intention is the Act will come into force on 1 June 1998.
NOTES TO EDITORS
1. A background note on the main provisions of the Bank of England Act 1998 is attached.
BANK OF ENGLAND ACT 1998
The main provisions of the Act are:
- setting out the monetary policy objectives of the Bank: to maintain price stability and, subject to that, to support the Government's economic policy, including its objectives for growth and employment;
- establishing the Monetary Policy Committee, which will have responsibility within the Bank for formulating monetary policy. The Committee will comprise the Governor, his two deputies and six other members. Two of those members will be the Bank officials responsible for monetary policy analysis and monetary policy operations respectively. The remaining four will be appointed by the Chancellor for their knowledge and experience;
- giving the Bank statutory operational responsibility for monetary policy. The Treasury will still have reserve powers, in extreme circumstances, to direct the bank with respect to monetary policy, if they are satisfied that this is required in the public interest;
- transferring to the Financial Services Authority the Bank's functions in relation to the supervision of banks;
- setting in place a new accountability framework for the Bank, based on:
- statutory duties of the Bank's Court of Directors, and specific responsibilities for the non-executive Directors; requirements for the Bank's accounts; and laying the Bank's annual report before Parliament.
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greater transparency in the Bank's operations:
- the Monetary Policy Committee will publish its actions, minutes of its meetings and a quarterly report; and the Court of Directors will review the Monetary Policy Committee's procedures and make an annual report.
- placing on a statutory basis arrangements for banks, building societies and overseas institutions to place deposits with the Bank in order to fund its operations.