The recent UK Parliament discussion of the "Bank of England and Financial Services Bill”, has raised concerns about the implication of new technologies such as blockchain on bank liquidity and solvency, CoinDesk reported. Among other things, the bill introduces provisions to amend governance and accountability arrangements at the Bank of England.

The bill’s clauses 12-15 relates to conferring upon the Bank the role of Prudential Regulation Authority (PRA), ending the existence of the current external body acting as the PRA and introducing a Prudential Regulation Committee (PRC)within the Bank to take responsibility for these duties. 

However, Richard Burgon, a legislator with the British Labour Party, said that “the effect of clause 12 will be to demote the PRA from being a separate authority to being a mere subcommittee within the Bank of England”.

He said that the clause would make the central bank as a “corporate entity” responsible for microprudential regulation. He expressed his concerns over the manner in which microprudential regulation will be conducted, adding that the new PRC will be less independent than the PRA.

Referring to the solvency of institutions, Burgon said that a microprudential regulator must perform an important function that involves conducting stress tests to ensure that individual financial institutions are putting to one side sufficient capital. He further noted that microprudential regulations are all the more important, given the fact that new starter banks and blockchain banks are coming up.

“With the creation of new starter banks, there is a greater need than ever for microprudential regulation as those institutions start up in business. If we continue to start new credit unions and new blockchain banks and so on, microprudential regulations remain fundamentally important”, Burgon said.