BOE Overhaul Becomes Law With New Rules for Financial Services

Britain’s latest overhaul of financial regulation and the Bank of England was signed into law on Wednesday after months of debate that included controversy over how tough the rules should be.

The bill includes internal changes at the institution that oversees London’s financial center, such as moving the Prudential Regulation Authority fully within the BOE and changes to the status of the Financial Policy Committee, the body that oversees financial stability. It also allows Governor Mark Carney to reduce the number of Monetary Policy Committee meetings to eight from 12 a year, bringing it into line with the frequency of the Federal Reserve and the European Central Bank.

The Bank of England and Financial Services Bill extends the Senior Managers’ Regime to all financial firms, and introduces a “duty of responsibility” for senior figures, as well as a certification procedure that will force managers to certify the good conduct of those reporting to them.

The duty of responsibility replaces the so-called reverse burden of proof that placed the onus on the senior management of a firm in difficulty to prove it didn’t know about wrongdoing. That measure was withdrawn, leading to accusations the government was going soft on bankers. Chancellor of the Exchequer George Osborne insisted last year that he hadn’t given into bankers’ demands, while Carney also defended the new rules.

The governor said on Wednesday that the legislation “will ensure the institution can operate more effectively.” It will help the BOE to “promote the good of the people of the U.K. by maintaining monetary and financial stability,” he said in a statement.

The new law also puts the BOE under the purview of the National Audit Office, though its remit will only extend to “value for money” reviews. Carney had said that the BOE’s policy functions must remain independent and not be compromised.

The act also enshrines in legislation the position of BOE deputy governor for banking and markets, currently occupied by Minouche Shafik, who joins the central bank’s Court of Directors. That body will also be reduced in size under the new regime.

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