The governor of the Bank of England has emphasised the importance of the bank’s independence, as an argument rages about the government's future power over regulators.
In a letter to Mel Stride MP on July 27, responding to the introduction a new bill in Parliament, Andrew Bailey said: “regulatory independence is important…anything that would weaken the independence of regulators would undermine the aims of the reforms".
Bailey said he welcomed the financial services and markets bill, which aims to establish a “strong, responsive and internationally respected” approach to financial services regulation in the UK.
“We support the proposals for regulators to have increased responsibility for setting regulatory requirements, acting within a strong policy and accountability framework set and overseen by parliament,” he said.
Bailey said regulatory independence is important for the competitiveness of the UK financial sector.
The FSM bill, if passed, will repeal EU rules over the British financial services industry.
Truss's plans
Foreign Secretary Liz Truss, currently the frontrunner in the Conservative Party leadership contest, has recently said, if elected, she would change the central bank’s mandate to ensure it controlled inflation and hinted her support for controversial “call in” powers.
Speaking at a party hustings earlier this month, Truss said: “The best way of dealing with inflation is monetary policy and what I have said is I want to change the Bank of England’s mandate to make sure in the future it matches some of the most effective central banks in the world at controlling inflation.”
Inflation is currently at 9.5 per cent, and has overshot the central bank’s two per cent target since May last year.
Truss has also said she will forge ahead with the introduction of powers to allow ministers to “call in” regulatory decisions in the public interest.
The plans were originally proposed as part of the financial services and markets bill, however they were omitted from the most recent draft of the legislation, released last month.
In the letter released today, Bailey said the Prudential Regulation Authority will publish a discussion paper in September setting out its "vision" for implementing the framework.
sally.hickey@ft.com
