Comment: Bank looking both ways as it crosses road

Martin Flanagan
Martin Flanagan
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MARK Carney’s changes to the internal workings of the Bank of England certainly show, to use a North American phrase, that he can walk and chew gum simultaneously.

They amount to a cultural and operational shake-up at the Bank – one being undertaken while the governor makes clear he is fully cognisant of the macro-economic and systemic risks still lurking on the peripheries six years after the financial crisis.

In short, under Carney, the Bank (with regulators the Prudential Regulation Authority and Financial Policy Committee already firmly under its wing) has to keep the day job going of financial supervision while driving through fundamental organisational change.

At the heart of the latter is to stop the central bank operating in “silos”, each with their own ring-fenced remit; but instead create enough overlap between departments and their back-up analysis to provide greater efficiency and a more panoramic ­perspective.

Carney’s predecessor, Lord King, had just two deputy governors, which will be increased to four. This includes Nemat Shafik, currently the UK’s senior official at the International Monetary Fund, becoming deputy governor for banking and markets – a welcome female presence and gender-balancing at the top of the Bank.

Ben Broadbent takes over as deputy governor for monetary policy. There will also be a chief operating officer responsible for day-to-day business, while the creation of an independent oversight committee to review the Bank’s performance shows Carney ­believes robust challenge is necessary to keep the central bank honest.

Taken cumulatively, these changes being ushered through the porticos at Threadneedle Street exhibit confidence.

Whether this is justified or will be mired in over-reach, only time will tell – but they certainly go beyond incremental tinkering.

Meanwhile, the governor, looking at the outside world, says the Bank became too fixated on inflation in the run-up to the crash, understandable given the price-volatile 1970s and early 1980s, but now a dodgy totem if taken in isolation.

Quite rightly, the financial crisis has embedded in the Bank’s psyche that financial stability is as important as price stability.

And, while repeating this week that the central bank will only eventually raise historically low interest rates gradually, Carney is alive to the danger that it was exactly such a period of low interest rates that encouraged wayward banks to chase “yield” at all costs including the sub-prime debacle.

It is always good to know when policymakers have learnt from ­previous disasters. Substantial initial strategic steps seem to be being taken in the right direction at the Bank, while not taking their eye off the ball of external events – nascent housing bubble? – and being outward-looking as well as inward-looking.

No need to fret about Co-op shelving numbers

The Co-operative Group’s decision to delay the publication of its annual ­results is not a fresh disaster at the mutual. Rather, it makes sense in the context of the abrupt departure of chief executive Euan Sutherland and a raft of management changes announced yesterday. We already know the figures won’t make pleasant reading.

A few weeks’ delay will not change that, and means virtually nothing in the context of the long haul in the Co-op dragging itself out of the mire.