Adair Turner, chairman of the FSA, has backed the accountability of the Financial Policy Committee (FPC) but warns that a lack of a clear target for its financial stability remit means scrutiny will not be straightforward.
Under proposals in the draft Financial Services Bill, the FPC will be positioned within the Bank of England.
Giving evidence last week to the parliamentary committee scrutinising the bill, Turner said that by applying similar accountability mechanisms to the FPC as the monetary policy committee, it will be accountable for its decisions.
These mechanisms include publishing minutes detailing members’ position and votes on policy. MPC members can also be called before the Treasury select committee.
Turner said: “The crucial elements for accountability are being put in place. But it is more difficult for the FPC because whereas for the MPC the Government is able to set the target in a precise quantitative fashion, for the FPC we are going to have a broad qualitative description of what those objectives are.”
The FPC will be made up of six members from the bank, Martin Wheatley, chief executive of the Financial Conduct Authority, and four external members.
Turner rejected concerns from committee member Lord Maples that it would be “dominated” by bank staff.
He told MPs that the FPC’s make-up strikes the right balance between external challenge and the bank being able to develop policy effectively.
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