Mark Carney announces restructuring of Bank of England

LONDON: Bank of England governor Mark Carney has announced a complete overhaul of the UK’s central bank, both in operations and management. In a radical departure from his predecessors and conventional central bank wisdom, the Governor said the almost exclusive focus on “inflation targets” in the past contributed to the failure of central bank to maintain financial stability.

“The reductionist vision of a central bank's role that was adopted around the world was fatally flawed,” he said. India is currently in the debate about whether the Reserve Bank should adopt inflation targeting as a core function.

Carney said that given a low interest regime, the Bank will come under increasing pressure to maintain financial stability, and need to bring its monetary policy and bank regulation activities closer together to maintain its oversight of the markets and banks. “It doesn’t take a genius to see similar risks exist today,” he said, in a speech outlining what is probably the biggest revamp at the BoE in decades.

Carney, the former Canadian Central Bank governor, was brought in last year with a mandate to “modernise” the Old Lady of Threadneedle St. The Bank of England has come under increasing criticism for its role in, first the Libor scandal, and then the even more widespread scandal involving fixing of forex rates. In a scathing criticism of the Bank of England’s previous regime, Carney said: “The age of informal responsibilities, nods, winks, secrecy and instinct is long past,” and promised a change in culture at the Bank and the way it works with the banking sector.

He also appointed two new deputy governors, Nemat Shafik, who will be only the second woman and the only one since 2008, and Ben Broadbent. After a six-month review, Carney’s restructuring brings in extensive changes in management, reducing the silos within the bank, creating new executive roles to oversee operations, and appointing an independent accountability unit. He also plans to increase communications between departments and bring in outside researchers and analysts.