Bank of England Act 1998

Part I — Constitution, regulation and financial arrangements

Constitution and regulation

Reviews

1

• (1) There shall continue to be a court of directors of the Bank.

• (2) The court shall consist of the following directors appointed by Her Majesty—

• (a) a Governor,

• (b) a Deputy Governor for financial stability,

• (ba) a Deputy Governor for markets and banking,

• (c) a Deputy Governor for monetary policy,

• (d) a Deputy Governor for prudential regulation, and

• (e) not more than 9 non-executive directors.

• (3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

• (4) Schedule 1 shall have effect with respect to the court.

Functions of court of directors

2

• (1) The court of directors of the Bank shall manage the Bank’s affairs, other than the formulation of monetary policy.

• (2) In particular, the court’s functions under subsection (1) shall include

• (a) determining the Bank’s objectives (including objectives for its financial management) and strategy.

• (b) the functions mentioned in section 3A(2) (the “oversight functions”).

• (3) In determining the Bank’s objectives and strategy, the court’s aim shall be to ensure the effective discharge of the Bank’s functions.

• (4) Subject to that, in determining objectives for the financial management of the Bank, the court’s aim shall be to ensure the most efficient use of the Bank’s resources.

• (5) Subsections (2) to (4) are subject to—

• (a) section 2A (Financial Stability Objective);

• (b) section 11 (objectives in relation to monetary policy);

• (c) Part 1A of the Financial Services and Markets Act 2000 (objectives and strategy of the Prudential Regulation Authority).

Functions to be carried out by non-executive members

3

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Annual report by the Bank

4

• (1) As soon as practicable after the end of each of its financial years, the Bank shall make to the Chancellor of the Exchequer a report on its activities in that year.

• (2) A report under this section shall, in particular, contain—

• (a) a report by the court of directors on the matters which it reviews, monitors or otherwise considers in the performance of its oversight functions (as defined by section 3A(2)),

• (aa) a report by the court of directors on the activities of the Financial Policy Committee of the Bank, and

• (b) a copy of the statements for the year prepared under section 7(2) and (2A) and the report of the Bank’s auditors on them .

• (3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

• (4) A report under this section shall also contain—

• (a) a statement of the rate or rates at which non-executive directors of the Bank have been remunerated in the financial year to which the report relates, and

• (b) a statement of the Bank’s objectives and strategy, as determined by the court of directors of the Bank, for the financial year in which the report is made.

• (5) The Bank shall publish every report under this section in such manner as it thinks appropriate.

• (6) The Chancellor of the Exchequer shall lay copies of every report under this section before Parliament.

• (7) The Chancellor may comply with subsection (6) by laying a document containing a report under this section together with a report by the Prudential Regulation Authority under paragraph 19 of Schedule 1ZB to the Financial Services and Markets Act 2000.

Revocation of directions under section 9H

5

• (1) The court of directors of the Bank shall have custody of the Bank’s seal.

• (2) The seal shall only be affixed to an instrument if the affixation has been authorised by the court or by a sub-committee of the court acting in exercise of delegated authority.

• (3) The affixing of the seal shall be attested by the signature of—

• (a) two members of the court,

• (b) one member of the court and the secretary to the court, or

• (c) two other officers of the Bank authorised by the court for the purpose.

Financial arrangements

Cash ratio deposits

6

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Accounts

7

• (1) The Bank shall keep proper accounts and records in relation to the accounts.

• (2) The Bank shall prepare for each of its financial years a statement of accounts consisting of—

• (a) a balance sheet as at the last day of the year, and

• (b) a profit and loss account.

• (2A) The Bank shall also prepare for each of its financial years a statement of accounts in relation to—

• (a) income received and assets accrued by the Bank by virtue of its functions as the Prudential Regulation Authority, and

• (b) expenses and liabilities incurred by the Bank by virtue of its functions as the Prudential Regulation Authority.

• (3) In preparing accounts under subsection (2), the Bank shall be subject to requirements corresponding to the relevant Companies Act requirements, except insofar as the accounts relate to the Issue Department.

• (4) The Bank may disregard a requirement to which it is subject under subsection (3) to the extent that it considers it necessary to do so having regard to the Financial Stability Objective.

• (4A) In preparing a statement under subsection (2A) the Bank must comply with any directions given by the Treasury as to—

• (a) the information to be contained in the statement and the manner in which it is to be presented, and

• (b) the methods and principles according to which the statement is to be prepared.

• (5) The Bank shall appoint an auditor or auditors to audit its accounts, including any statement under subsection (2) or (2A) .

• (5A) The auditor's report on a statement under subsection (2A) must state whether the auditor is satisfied that the Bank has complied with the requirements of Part 3 of Schedule 1ZB to the Financial Services and Markets Act 2000 (Prudential Regulation Authority fees and penalties).

• (6) As soon as practicable after receiving the report of its auditors on a statement prepared under subsection (2) or (2A) , the Bank shall send a copy of—

• (a) the report, and

• (b) the statement,

to the Chancellor of the Exchequer.

• (7) The Treasury may by notice in writing to the Bank require it to publish in such manner as it thinks fit such additional information relating to its accounts as the Treasury may specify in the notice, including information which the Bank has excluded under subsection (4) from a statement under subsection (2).

• (8) The Treasury shall consult the Bank before giving a notice under subsection (7).

• (8A) A direction under subsection (4A) or a notice under subsection (7) may be revoked by a further direction or notice.

• (9) In subsection (3), the reference to the relevant Companies Act requirements is to the requirements to which the directors of a company which is a banking company for the purposes of the Companies Act 2006 are for the time being subject under that Act (except sections 412 and 413 (directors’ benefits)) in relation to the preparation of accounts under section 394 of that Act.

Compliance with directions under section 9H

8

• (1) In section 1 of the Bank of England Act 1946, in subsection (4), (amount payable to Treasury in lieu of dividends on Bank stock), for the words from “the sum” to the end there is substituted “ a sum equal to 25 per cent. of the Bank’s net profits for its previous financial year, or such other sum as the Treasury and the Bank may agree. ”

• (2) In that section, at the end there is inserted—

(6) In subsection (4) of this section, the reference to the Bank’s net profits for its previous financial year is to the profits shown in the audited accounts for that year less the amount of the tax charge so shown.

• (3) In Schedule 1 to that Act (supplemental provisions), after paragraph 11 there is inserted—

(11A) (1) If, when a payment falls to be made under section 1(4) of this Act, the Bank’s accounts for the previous financial year have not been audited, the payment shall be made on the basis of the Bank’s estimate of the relevant amounts. (2) If an amount estimated under sub-paragraph (1) of this paragraph differs from the amount shown in the audited accounts, an appropriate adjustment shall be made to the next payment under section 1(4) of this Act to be made after the difference becomes apparent.

• (4) In that Schedule, for paragraph 14 there is substituted—

(14) Any sum paid by the Bank to the Treasury in lieu of dividends shall be allowed as a deduction in assessing the Bank to corporation tax for the accounting period by reference to which the payment is calculated.

Supplementary

Consequential amendments

9

• (1) In section 14 of the National Debt Reduction Act 1786 and section 32 of the Life Annuities Act 1808, for “deputy governor” there is substituted “ deputy governors ”.

• (2) In section 55 of the National Debt Act 1870, the first reference to the Deputy Governor of the Bank of England shall be treated as a reference to a Deputy Governor of the Bank of England.

• (3) In section 3(3) of the Bank of England Act 1946, after “this Act” there is inserted “ and the Bank of England Act 1998 ”.

Part II — Monetary Policy

Role of the Bank

Statements of policy by Financial Policy Committee

10

In section 4(1) of the Bank of England Act 1946 (power of the Treasury to give directions to the Bank), at the end there is inserted “ , except in relation to monetary policy ”.

Objectives

11

In relation to monetary policy, the objectives of the Bank of England shall be—

• (a) to maintain price stability, and

• (b) subject to that, to support the economic policy of Her Majesty’s Government, including its objectives for growth and employment.

Specification of matters relevant to objectives

12

• (1) The Treasury may by notice in writing to the Bank specify for the purposes of section 11—

• (a) what price stability is to be taken to consist of, or

• (b) what the economic policy of Her Majesty’s Government is to be taken to be.

• (2) The Treasury shall specify under subsection (1) both of the matters mentioned there—

• (a) before the end of the period of 7 days beginning with the day on which this Act comes into force, and

• (b) at least once in every period of 12 months beginning on the anniversary of the day on which this Act comes into force.

• (3) Where the Treasury give notice under this section they shall—

• (a) publish the notice in such manner as they think fit, and

• (b) lay a copy of it before Parliament.

Monetary Policy Committee of the Bank

Monetary Policy Committee

13

• (1) There shall be a committee of the Bank, to be known as the Monetary Policy Committee of the Bank of England, which shall have responsibility within the Bank for formulating monetary policy.

• (2) The Committee shall consist of—

• (a) the Governor of the Bank,

• (aa) the Deputy Governor for financial stability,

• (aaa) the Deputy Governor for markets and banking,

• (ab) the Deputy Governor for monetary policy,

• (b) one member (to be known as the Chief Economist of the Bank) appointed by the Governor of the Bank after consultation with the Chancellor of the Exchequer, and

• (c) 4 members appointed by the Chancellor of the Exchequer.

• (3) The member appointed under subsection (2)(b) shall be a person who carries out monetary policy analysis within the Bank.

• (4) Before appointing a person under subsection (2)(c) the Chancellor of the Exchequer must—

• (a) be satisfied that the person has knowledge or experience which is likely to be relevant to the Committee's functions, and

• (b) consider whether the person has any financial or other interests that could substantially affect the functions as member that it would be proper for the person to discharge.

• (5) Schedule 3 shall have effect with respect to the Committee.

Publication of statements about decisions

14

• (1) As soon as reasonably practicable after each meeting of the Monetary Policy Committee, the Bank shall publish a statement as to whether it was decided at the meeting that the Bank should take any action, other than action by way of intervening in financial markets, for the purpose of meeting its objectives under section 11 and, if it was, what the action is.

• (2) If, at any meeting, the Committee decides that the Bank should intervene in financial markets, it shall also consider at the meeting whether immediate publication of the decision would be likely to impede or frustrate the achievement of the intervention’s purpose.

• (3) If the Committee decides under subsection (2) that immediate publication of a decision would not have the effect mentioned there, the Bank shall, when it publishes a statement under subsection (1) about the meeting, publish a statement as to what action by way of intervening in financial markets the Committee has decided the Bank should take.

• (4) If the Committee decides under subsection (2) that immediate publication of a decision would have the effect mentioned there, it shall keep under consideration the question of whether publication of the decision would still have that effect.

• (5) As soon as reasonably practicable after the Committee has decided that publication of a decision which has not been the subject of a statement under subsection (3) would no longer have the effect mentioned in subsection (2), the Bank shall publish a statement as to what action by way of intervening in financial markets the Committee decided the Bank should take and when the decision was made.

• (6) Publication under this section shall be in such manner as the Bank thinks fit.

Publication of minutes of meetings

15

• (1) As soon as reasonably practicable after each meeting of the Monetary Policy Committee, the Bank shall publish minutes of the meeting ....

• (2) Subsection (1) shall not apply to minutes of any proceedings relating to—

• (a) a decision to intervene in financial markets, or

• (b) a decision about the publication of a decision to intervene in financial markets,

unless the Committee has decided that publication of the decision to intervene would not be likely, or would no longer be likely, to impede or frustrate the achievement of the intervention’s purpose.

• (3) Minutes of proceedings relating to—

• (a) a decision to intervene in financial markets, or

• (b) a decision about the publication of a decision to intervene in financial markets,

shall, if not required to be published as soon as reasonably practicable after the meeting, be published by the Bank as soon as reasonably practicable after a statement about the decision to intervene is published under section 14(5).

• (4) Minutes published under this section shall record, in relation to any decision of the Committee, the voting preference of the members who took part in the vote on the decision.

• (4A) The Bank shall exclude from minutes published under this section information which relates to proceedings of the Financial Policy Committee if the Bank considers that publication of that information would be against the public interest.

• (5) Publication under this section shall be in such manner as the Bank thinks fit.

Functions of court of directors

16

• (1) The court of directors of the Bank shall keep the procedures followed by the Monetary Policy Committee under review.

• (2) In particular, the court's function under subsection (1) shall include determining whether the Monetary Policy Committee has collected the regional, sectoral and other information necessary for the purposes of formulating monetary policy.

• (3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Information and reports

Power to obtain information

17

• (1) The Bank may by notice in writing require an undertaking to which this section applies to provide the Bank with such information as may be specified in the notice, being information about the relevant financial affairs of the undertaking which the Bank considers it necessary or expedient to have for the purposes of its functions under this Part.

• (2) A notice under subsection (1) may require information to be provided—

• (a) in such form or manner as may be specified in the notice;

• (b) at such time or times as may be so specified;

• (c) in relation to such period or periods as may be so specified.

• (3) An undertaking is one to which this section applies if—

• (a) it has a place of business in the United Kingdom; and

• (b) it falls within subsection (3A), (3B), (3C) or (3D).

• (3A) An undertaking falls within this subsection if it is a deposit-taker.

• (3B) An undertaking falls within this subsection if it is not a deposit-taker but it—

• (a) falls within the subsector “other monetary financial institution”, as defined by paragraph 2.48 of Annex A to Council Regulation ( EC ) No. 2223/96 ,

• (b) carries on a business of granting credits secured on land used for residential purposes,

• (c) has issued a debt security, or

• (d) has acted as an agent in connection with arranging or managing the issue of a debt security.

• (3C) An undertaking falls within this subsection if it is a financial holding company.

• (3D) An undertaking falls within this subsection if it is not a deposit-taker but continues to have a liability in respect of a deposit which was held by it in accordance with the Banking Act 1979 or the Banking Act 1987 or a permission under Part 4A of the Financial Services and Markets Act 2000.