Charlotte Hogg, the Bank of England's deputy governor for markets and banking, "fell short of the very high standards" required, MPs have said.
The committee said it had "set aside" its approval of Ms Hogg's appointment.
She failed to tell the Bank her brother had a senior role at Barclays, one of the banks she would have overseen.
The Bank's code of conduct, which Ms Hogg had helped to draw up, states employees must declare such connections.
The Treasury Committee said that her oral and written evidence "has given the Committee grounds for concern".