For some time the Governor, Eddie George, had felt that the Bank was not clear enough about its functions: that it did a lot of different things without either being sure why it was doing them, or to what extent these were its sole responsibility. As a result, when things went wrong, as inevitably they would from time to time, the Bank tended to be blamed even when it was not its fault. So six months ago Mr George, together with the new Deputy Governor, Mr Pennant- Rea, and the executive directors drew up a new reporting structure designed to correct this. There then followed intensive discussion with the staff, and now finally the names have been put to the new job titles.
The key element of the new structure is the reorganisation of the Bank into two wings - monetary stability and financial stability. Two of the four executive directors come under each wing. Under the first are Mervyn King, the former LSE professor who is in charge of the economics department and the only executive director who is not a career Bank person; and Ian Plenderleith, who is in charge of operating monetary policy. Professor King is, so to speak, the 'thinker' and Mr Plenderleith is the 'doer'.
The aim is focus
On the financial stability wing are Brian Quinn, who carries on his job of banking supervision but gets wholesale markets and gilts under his wing; and Pen Kent, who sweeps up all the other Bank functions, including persuading clearing banks to carry on supporting companies in intensive care, sorting out the Stock Exchange settlement system, and running the banknote printing business.
So that is the structure. The idea behind it is quite clear - to get everyone focused on the two core functions of the Bank. Whether the structure will actually work better than the old one remains to be seen. The reorganisation of the World Bank in the late 1980s led to years of internecine strife as the displaced bureaucrats fought for their offices, staff and status. The reorganisation of the European Bank for Reconstruction and Development on the other hand, just completed, ended an absurd distinction between 'merchant' and 'development' banking and has already produced sweetness and light. For the Bank, the alternative would have been to keep the old structure, encouraging people to work together by having more cross-boundary committees. This would make sure everyone knew what everyone else was doing.
Perhaps the really important change will not be in the new structure at all, but in the new style. This is already evident in lots of small ways. The use of first names is one. Mr Pennant-Rea, coming from journalism, found it natural to want to be called Rupert rather than the seriously naff appellation of 'Mr Deputy'. Another sign of changing style has been the democratisation of the various staff messes, which now conform to a single grade instead of the multiplicity of levels of service. More important has been the practice of bringing even junior staff into discussion groups - so that the person actually doing the job gets an opportunity to speak when policy is being formed.
None of this is particularly revolutionary - it is just good management - but it takes leadership from the top to impose a different culture on an organisation. Both Mr George and Mr Pennant-Rea wanted to change things, and this is the result.
It is impossible to make a judgement at this stage as to whether the changes will really alter the culture or prove largely cosmetic. There is no doubt that something was going wrong in the Bank's internal communications: the muddle over the shut-down of BCCI showed a failure to pass worries up the line of command to ensure that action was taken. But whether this was principally the result of an excess of deference, an inappropriate management structure, or simple human failure is not really clear.
At least the aims of a central bank - ensuring that both the currency and the banking system are sound - are now made explicit. This reinforces other recent changes, such as the Bank's inflation report and the publication of the minutes of discussion of monetary policy.
At some stage the articles of the Bank need to be changed to reflect its real duties and to prepare it for a more independent role. But maybe this piecemeal approach to reform - changing the way something is done on the hoof and then worrying about the legal niceties later - is the best way of allowing the Bank to feel its way towards independence. It is certainly very British.Reuse content