Bank’s King spurns 2.5pc salary hike

BANK OF ENGLAND governor Mervyn King has turned down his right to a 2.5 per cent pay rise in both 2010 and 2011 but his annual pay packet, including benefits, will still amount to £305,764, the central bank’s annual report revealed yesterday.

This is over £30,000 more per year than the highest-paid civil servant, according to Cabinet Office figures published earlier this week.

Although the governor will accept a two-year pay freeze, deputy governors Paul Tucker and Charles Bean will both continue to accept their 2.5 per cent rises. Their basic salaries are £252,497 each. Twelve employees of the Bank of England earn more than £150,000, the report said.

In his foreword to the report, King stressed the limitations of the current regulatory framework, arguing: “[It] is not sufficient. Experience suggests there is a need for additional policy tools that could improve resilience in, and prevent excessive growth of, the financial sector.”

He said: “The system cannot be allowed to revert to its former ways as if nothing has happened. We must seize this opportunity for reform.” He reiterated his concern surrounding banks that are “too important to fail” and stressed that we cannot allow this anomaly to continue.

The Bank of England, which is self-funded, has seen its Banking department’s balance sheet explode to £223.1bn as of the end of February. This is primarily because of the increased lending to the Bank of England Purchase Facility Fund, which conducted the gilt purchase operations on behalf of the Bank.

However, the division’s net profit fell sharply to £194m in 2009-10 from £834m the previous year. The annual report said that the Banking department’s profits had been elevated in previous years because of the Bank’s policy actions such as income from long-term repo operations. It added: “In 2008-09, it also reflected the financial effects of emergency liquidity assistance.”

The central bank’s total assets amounted to £246bn in 2010 while its capital and reserves was just over £4bn.