Former Bank of England deputy calls for MPC and FPC to be merged

Former Bank of England deputy governor Sir John Gieve is calling for functions of the monetary and financial policy committees to be merged into a new macro-economic management committee.

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Speaking at a Policy Exchange debate on Reform of the Bank of England yesterday, Gieve, who was responsible for financial stability at the Bank between 2006 and 2009, says its structure should be simplified.

He says: “It would be easier to manage if there were just two committees. One would be a macro committee using regulatory instruments as well as monetary policy to steer the economy. And the other would be a micro committee looking at the structure of the financial industry and what has to be cleared through exchanges and what capital banks need.

“It would simplify the Bank but it would still also need another body to challenge, ventilate and prevent a narrow orthodoxy from becoming embedded over time on regulation and macro-elements.”

Gieve also called for a full inquiry into the Bank of England’s role in the financial crisis, saying he is “surprised” it has not happened already.

He says: “The Treasury select committee has held hearings but they have not been on the scale that has happened in America where some reports have been very impressive. A proper report would have to be wider than the Bank of England and go back before the crisis and include the Treasury as well as the FSA. I would welcome it but it could be difficult from a political viewpoint as they have already come up with the answers so it is a bit late to consider the cause. Parliament could hold an inquiry if it wanted to.”

Conservative MP and TSC member Andrea Leadsom says the TSC is insisting an inquiry takes place in some form.

She says: “The TSC is calling for a supervisory board whose remit is to look over decision-making processes in periods of crisis and report on it. We are calling for a review of the Bank’s handling of the crisis but through its own supervisory board. I will take it up with the TSC chairman in the event these changes are not forthcoming.”

This week, chancellor George Osborne revealed that the next Bank governor will be appointed by the end of the year, with the job being openly advertised for the first time in history.