Conflicts of interest and the Monetary Policy Committee

1: Introduction

1.1: The Bank of England (the “Bank”) is required to issue and maintain a conflicts of interest code of practice (the “Code”) for the Monetary Policy Committee (the “Committee”).^{footnote [1]}

1.2: This Code, approved by the Bank’s Court of Directors (“Court”) following consultation with HM Treasury, applies to all the members of the Committee (“Committee Members”) whether on the Committee by virtue of their office (the Governor and Deputy Governors of the Bank, the Chief Economist), by appointment from within the Bank or by appointment of the Chancellor of the Exchequer (“the Chancellor”).^{footnote [2]}

1.3: The Governor, Deputy Governors, and Chief Economist are required to give exclusive services to the Bank. External members appointed by the Chancellor^{footnote [3]} sit on a part-time basis and are appointed on the basis of having knowledge or experience which is likely to be relevant to the Committee’s functions. Individuals may therefore be considered for appointment and may be able to remain members of the Committee, when they have an existing interest, or acquire a new interest, which may give rise to an actual or potential conflict of interest and/or duty.

1.4: The purpose of this Code is to set out principles, guidelines and procedures for identifying, monitoring and managing actual or potential conflicts of interest with a view to:

• ensuring the independence, integrity and impartiality of the Committee’s decision-making in the performance of its functions; and
• avoiding any perception that a Committee Member or any connected person^{footnote [4]} may obtain an unfair advantage by reason of the Committee Member’s association with the Committee (for example, by assumed access to information or policy thinking).

1.5: Wherever used in this Code, the term “conflict” or “conflict of interest” means an actual or potential conflict of interest and/or duty and an “interest” includes any direct or indirect interest (including any reasonably likely future interest) whether financial or otherwise.

1.6: A conflict of interest may arise where a Committee Member has an interest in any dealing or business being considered by the Committee. A conflict may also arise where a Committee Member has duties owed to a third party (for instance to a company of which the Committee Member is a director, or from a past association) which may conflict with the functions as member which it would be proper to discharge as a member of the Committee.

1.7: The Secretary of the Bank (the “Secretary”) is the Bank’s Conflicts Officer and supports the Committee in reaching its decisions on the application of this Code. Committee Members should discuss with the Secretary if they have any questions or require advice in relation to the application of the Code.

1.8: This Code does not address proposed speeches, public engagements or media plans by Committee Members. These are subject to the Committee’s separate communications guidance.^{footnote [5]}

2: Identifying potential conflicts of interest

2.1: All Committee Members must be alert to situations that may give rise to a conflict. It is not possible to set out every situation which may result in a conflict. A judgement should be made on a case by case basis but common situations include:

(a) Directorships and business interests

The Bank’s general code of conduct (“Our Code”), which applies to Committee Members, contains an obligation to disclose and obtain the consent of the Bank before accepting a directorship. Controlling shareholdings in or Board membership of commercial organisations may create a conflict such as to disqualify an individual from membership or on-going membership of the Committee.

Relevant factors to consider include:

• whether the information that a Committee Member is likely to have access to as a result of membership of the Committee is likely to be, or could reasonably be seen to be, commercially valuable to the commercial organisation or any member of the wider group to which it belongs;
• the precise nature of the commercial organisation’s business including, in particular, whether it or any member of the wider group to which it belongs is engaged in any form of activity in the markets for foreign exchange or interest rate linked securities or investments of any kind and, if so, the size and significance of such activities to the commercial organisation or the wider group to which it belongs.

(b) Employment and consultancy arrangements

In accordance with Our Code Committee Members must not take up any additional employment or consultancy arrangements without the prior consent of the Bank. Full or part-time employment in any commercial organisation (or any member of the wider group to which it belongs) which is engaged in any form of activity in the markets for foreign exchange or interest rate linked securities or investments of any kind is likely to be regarded as giving rise to a conflict such as to disqualify the individual from membership or on-going membership of the Committee. Whether employment or consultancy arrangements disqualify an individual from membership of the Committee will depend on the precise nature of the services provided to the commercial organisation by the Committee Member, and of the commercial organisation’s business.

(c) Financial interests

Our Code also includes provisions on confidentiality and a financial transactions policy which, for all Committee Members, requires full disclosure of assets and liabilities, and the Bank’s prior consent for any relevant transactions. It also prohibits the acquisition of securities issued by any entity regulated by the Bank, including Bank-regulated persons or their financial holding companies. Holding a financial interest in such a firm, including an interest which arises under deferred compensation arrangements with such a firm, may disqualify an individual from becoming a member of the Committee unless it is not substantial in terms of the individual’s wealth at the time of appointment or is externally managed as part of a discretionary portfolio.

Existing holdings in such firms may be retained (provided they have been considered at the time of appointment not substantially to affect the functions as Committee Member that it would be proper for the person to discharge) but must not be actively managed thereafter other than to sell them, with the Bank’s prior consent in accordance with the Bank’s personal financial transactions policy.

(d) Political involvement

In their official capacity, Committee members should be even-handed in all dealings with political parties. They must not occupy a paid party political post or hold a sensitive or high-profile role in a political party.

On matters directly related to the work of the Committee or the Bank more widely, Committee members must not make statements or engage in any other activity that could call into question their political impartiality in their public role, and must consult the Secretary if in any doubt.

As provided in Our Code, if a Committee Member wishes to engage in political activity at any level, consent must be obtained from the Secretary, who will consult the Governors or the Chair of Court as necessary.

(e) Charity roles

The Bank encourages its staff to support and participate in charitable organisations. Committee Members must nevertheless disclose any existing charity roles prior to appointment to the Committee (e.g. trusteeships) and obtain the Bank’s prior consent when seeking to take on new charitable roles. Membership of a charity’s investment committee falls under the personal financial transactions policy which forms part of Our Code.

3: Procedure for declaring interests

Prior to appointment

3.1: The Chancellor appoints 4 members of the Committee.^{footnote [6]} Before appointing such members the Chancellor must:

• be satisfied that the person has knowledge or experience which is likely to be relevant to the Committee’s functions, and
• 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.^{footnote [7]}

Following appointment

3.2: Following appointment, before attending a meeting of the Committee for the first time, each Committee Member will be required to complete and submit to the Committee, via the Secretary, a declaration of interests statement:

• restating all of the interests that have been disclosed to the Chancellor prior to their appointment;
• confirming that they are not aware of having any other interests that may give rise to a conflict; and
• confirming that they will declare any interests that arise in the future that may give rise to a conflict and will promptly submit an updated declaration of interests form if any changes occur that may give rise to a conflict of interest.

3.3: At least once in every 12-month period, each Committee Member must review the information relating to him/her contained in the register of interests maintained by the Secretary and declare that the information is correct or make a further declaration to the Committee, via the Secretary, if necessary.

In meetings

3.4: The Act provides that if a Committee Member has any direct or indirect interest (including any reasonably likely future interest) in any dealing or business which falls to be considered by the Committee, the Committee Member must declare that interest to the Committee when it considers the dealing or business.

3.5: Consequently, in accordance with paragraph 3.2(c) or following a review referred to in paragraph 3.3, if a Committee Member considers that they have an interest which may give rise to a conflict, they must provide the Committee, via the Secretary, with all relevant information as soon as possible (and no later than the start of the Committee meeting at which the relevant matter is on the agenda).

4: Procedure for managing conflicts

4.1: The Secretary will consider, in consultation with the Chair, whether a declared interest by a Committee Member may give rise to a conflict. The Chair of the Committee will inform the Committee of any interest which may give rise to a conflict and will consider whether it is appropriate for the Committee to consider the matter without the presence or participation of the Committee Member.

4.2: The Committee will:

• assess the nature and significance of the interest that has been declared;
• assess whether a perception could arise that the Committee Member in question or any connected person could be seen to obtain an unfair advantage by reason of the Committee Member’s association with the Committee;
• assess the risk to the integrity and impartiality of the Committee’s decision making in the performance of its functions;
• decide whether the interest that has been declared gives rise to a conflict;
• to the extent the interest that has been declared gives rise, in the Committee’s opinion, to a conflict, consider whether steps can be taken to avoid or manage the conflict; and
• assess the extent to which a Committee Member who is likely to have to recuse themselves from issues and decisions as a result of a conflict will be able to discharge their functions as a Committee Member effectively. Where it is concluded that the Committee Member’s ability to discharge their functions will be substantially affected, the Committee will advise Court and HM Treasury that they believe this to be the case.

4.3: If the Committee considers that the interest that has been declared does not give rise to a conflict, it may agree that the Committee Member who has declared the interest may participate in all the discussions and the decision-making process of the Committee unconditionally.

4.4: If the Committee considers that the interest that has been declared does give rise to a conflict, it will determine what action is appropriate in light of the nature and extent of the conflict. This may include preventing the Committee Member who has declared the conflict from:

• receiving any papers and/or participating in any Committee discussions in relation to a matter; and/or
• participating in Committee discussions or decision-making in relation to a matter while the conflict exists.

4.5: The Committee will ensure that the minutes of the Committee meeting note the interest declared and, if relevant, the reasons why the Committee considered that it gave rise to a conflict and an outline of the steps to be taken which are considered appropriate to avoid or manage the conflict declared.

4.6: The Committee, via the Secretary, will promptly consult with Court on any proposed decision of the Committee to authorise a conflict and will inform Court of any conditions which the Committee has decided are required to avoid or manage the conflict.

4.7: The Bank may, with the consent of the Chancellor, remove a person from office as Governor Deputy Governor of the Bank, and remove an external member of the Committee or the member appointed by the Governor if it is satisfied that they are unable or unfit to fulfil their functions as a Committee Member.^{footnote [8]}

4.8: Court may with the consent of the Chancellor, also remove an external member of the Committee if it is satisfied that in all the circumstances the relevant Committee Member’s financial or other interests are such as substantially to affect the functions as member which it would be proper for the relevant Committee Member to discharge.^{footnote [9]}

5: Register of interests

5.1: The Secretary is responsible for maintaining a register of Committee Members' declared interests. With the Bank’s General Counsel, the Secretary will regularly review the register of interests.

5.2: The Bank will publish a register of the interests of Committee Members on its website in addition to the remuneration paid by the Bank to Committee Members.

6: Post-appointment employment restrictions

6.1: For a period agreed with the Bank, following the termination of a Committee Member’s appointment to the Committee that member may not accept, without the prior written consent of the Secretary (having consulted the Governor and Chair of Court), any additional appointment, employment or duties, whether remunerated or not, outside the Bank over and above those which had been permitted while a member of the Committee. Any additional time commitment or amended duties in relation to an appointment or amended duties in relation to an appointment or employment for which consent has previously been granted will be treated as a new commitment for the purposes of this paragraph.

6.2: During the period referred to in paragraph 6.1 the Committee Member will remain subject to this Code and, subject to complying with this section 6, will be entitled to receive an amount equivalent to the fee which they would have received had the appointment to the Committee continued during this period.

7: Monitoring compliance and reviewing this code

7.1: Any Committee Member who becomes aware of a breach of this Code must report it to the Committee, via the Secretary, as soon as possible.

7.2: All breaches of this Code will be considered at the next meeting of the Committee, or earlier if considered necessary by the Chair, and the provisions of Section 4 of this Code will apply. All breaches of this Code must be recorded in the minutes of the relevant Committee meeting together with and an outline of the steps to be taken by the Committee which are considered appropriate.

7.3: This Code has been implemented for the purpose set out in paragraph 1.4. Any failure to comply with the terms of this Code will not, in itself, result in a decision of the Committee being invalidated.

7.4: This Code and its application by the Committee will be reviewed every two years by Court, or sooner if required.