'Autocratic management' at Bank of England under fire

Staff only willing to tell them what they wanted to hear, says governance review

Russell Lynch,Jamie Dunkley
Friday 02 November 2012 01:00

Sir Mervyn King and the Bank of England's top managers drew fire for an autocratic style today, after a review of the central bank's performance said staff were only willing to tell them what they wanted to hear.

The Bank commissioned a trio of reports by international experts in May in response to criticisms over its governance.

A report by the former JP Morgan joint chief executive, Bill Winters, warned there "appears to be some tendency for them to filter recommendations in such a way as to maximise the likelihood that senior staff will find the recommendation palatable".

A second report by the former Federal Reserve statistics director David Stockton said "cultural changes" could be necessary at the Bank, "aimed at cultivating and embracing a more assertive and experienced staff" willing to challenge the Monetary Policy Committee (MPC) over its forecasts.

Reflecting on the findings, one former Bank economist told The Independent: "The process within the Bank was one of second-guessing what your superiors and specifically Mervyn King would like you to think about a certain subject before offering your opinion on it. Agreeing with the Governor was the route to advancement. Some people did not like it and left. It's all a bit pointless if you are just going to reflect back what somebody already thinks. There were a lot of people at the Bank being paid vast amounts of money to hold a mirror up to Mervyn."

In response the Bank said it would give "very careful attention" to the comments. "The reviewers have provided us with a large number of constructive recommendations and options for further consideration."

The reports are likely to increase calls for greater transparency at the Bank ahead of Sir Mervyn's retirement next year.

Messrs Winters and Stockton and the former MPC member Ian Plenderleith, who also contributed to the review with a third report, will appear before the Treasury Select Committee on 20 November.

The report by Mr Stockton – a former research director at the US Federal Reserve – also raised doubts over the MPC's "overly optimistic" recovery predictions. The committee had made "somewhat larger forecast errors for growth" than the average of external forecasters, and failed to apply "systematic, detailed quantitative analysis" to explain its errors, his report said. He also criticised the process in which the nine-strong committee signs up to its "best collective judgement" on inflation and growth.

Mr Stockton said the process had "the virtue of simplifying the message", but added that "the financial crisis highlighted just how wrong the consensus view can be at times".

He said: "The current focus … may round off differences of view that, if brought into sharper focus, could help the MPC better understand the vulnerabilities in its outlook for the economy and its policies."

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