All change at the Bank
DIFFERENT units across the Bank of England will be forced to work together rather than fighting their own corners, Mark Carney said last night, unveiling a radical array of reforms.
The governor and the Treasury made a series of major hires, including new deputy governor Nemat Shafik, to cope with the hugely expanded powers to regulate the City.
A range of new directorates have also been established to work across major policy areas including monetary policy and financial stability.
The governor indicated the Bank’s reactions in the crisis were slowed by a dysfunctional structure which allowed units to push for their own agendas, rather than working as one. Without this reform he fears Britain is poorly prepared for another crisis.
Carney gave the example of low interest rates before the crash which promoted growth but drove the buildup of risks which the Bank was not designed to identify and stop.
“It doesn’t take a genius to see that similar risks exist today,” he said. “That tension between monetary and financial stability is best managed in a coordinated way in a single institution.”
The governor also hopes that the Bank’s regulatory power and information will allow regulators to make better decisions about the state of the banking sector and overall economy.
Had the reforms been in place before the financial crisis, Carney argued Britain could have had “more Canadian outcomes” instead of “five years of stagnation.”
But analysts were more cautious. “By introducing a matrix management structure with joint reporting lines, this reorganisation may create its own tensions,” warned Iain Coke from the Institute of Chartered Accountants in England and Wales.
And despite the new appointments at the Bank, critics fear there is still a lack of industry know-how at the top of the regulator.
“One disappointing thing about the Bank of England appointments – [there is] no one with markets or banking experience,” said the British Bankers’ Association’s James Barty.
“Carney has still to plug this gap.”