King denies stamping on dissent in reign at Bank

Tim Wallace
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BANK of England governor Sir Mervyn King yesterday denied claims he crushes dissent at the central bank, insisting he has fostered an open, intellectual culture in his time in the top job.

The outgoing governor also tried to defend his decision to let the Treasury take £37bn from the asset purchase programme, although he apologised to MPs for the presentational failings which left observers fearing the Bank’s treasured independence is being undermined.

A major report from former JP Morgan banker Bill Winters found Bank staff are unwilling to put forward all of their ideas to senior managers in case dissent harms their careers.

The City grandee criticised Sir Mervyn for failing to interact with junior staff, and recommended the Bank adopt more modern management systems and a “360 degree” approach for assessing staff.

But Sir Mervyn hit back at the claims, arguing all three suggestions are already in place.

“I regularly talk to small groups of junior staff,” he told MPs on the Treasury Select Committee.

“On monetary policy heads of division send their views to the monetary policy committee (MPC) on what the committee should be doing. They speak to their juniors on what should happen – we do elicit views positively.”

The governor also had to defend himself against claims the transfer of £37bn from the Bank to the Treasury shows the MPC has lost full control of monetary policy.

The transfer was possible because the Bank has stored up the income from the coupons on bonds purchased under the quantitative easing programme. The Treasury indemnifies the programme, so it must cover any losses but can also take cash surpluses.

The transfer is equivalent to £37bn of quantitative easing, spread over a year – meaning the Treasury, not the MPC has ordered a round of easing.

MPC members Ben Broadbent and Martin Weale admitted one reason they voted against further easing in October was the transfer of cash.

But the move was not public knowledge until several days later, meaning the wider financial system was not aware that a form of QE, initiated by the Treasury, was taking place.

“It’s unfortunate if people were misled and I regret that,” said Sir Mervyn.