In a report on the Accountability of the Bank of England, MPs also called for the Treasury Select Committee to have the power to veto the appointment of a governor.
The wide-ranging reforms would, if implemented, be a radical shake up of the way the Bank of England operates alongside Parliament.
The MPs concluded that a single, non-renewable eight-year term for a governor would ensure the holder of the post was free from political interference but also be forced to move on before becoming obsolete in the role.
Since 2009, governors have been allowed to serve two five-year terms. Current governor Mervyn King has been in the post since 2003, although the reforms are not expected to apply until after his tenure.
Chairman of the Committee, MP Andrew Tyrie, said: “The Bank of England will play an even more vital role in preventing future crises, yet aspects of its governance appear antiquated.
“The radical shake up of financial regulation proposed by the government provides the opportunity to do something about it.”
It was also recommended that during times of financial turbulence where public money is at risk, the Chancellor should be given temporary and limited powers to direct the Bank.
“The Chancellor should have a specific power of direction when public money is at risk. This will place the Chancellor firmly in charge during a crisis and accountable to Parliament for decisions,” said Tyrie.
“Scrutiny of the Bank should reflect the needs of 21st century democracy. That means clear lines of accountability, and more information made available to Parliament. It should also be crystal clear who is in charge at a time of financial crisis. On all these issues the Government’s draft legislation would benefit from improvement.”
