The author of a new book on the Bank of England and the financial crisis says before it is handed new powers there must be a Royal Commission into how the Bank dealt with the crash.
Under the new regulatory structure the Bank will be handed far greater powers than it currently has including responsibility for prudential regulation of firms and taking action against domestic and international threats to financial stability.
Dan Conaghan, author of The Bank, Inside the Bank of England, says there are serious questions which need to be answered before those powers are handed over.
He says: “The book questions the Bank’s policy of quantitative easing, how its original remit has changed, its failure to resolve the issue of credit supply to SMEs, its damage to the UK pensions system and its debauchment of the gilts market in the process of the Bank’s acquisition of a third of Britain’s national debt.
“Researching the book I spoke to senior former and current Bank and Treasury officials. They reveal the Bank of England as an institution is often disconnected from financial markets and from other central banks and paralysed by dysfunctionality in the Bank’s executive team.”
Conaghan is an ex-Daily Telegraph journalist and has also worked for the investment firms SGC Asset Management and Glendevon King Asset Management.
The Bank has been criticised for snubbing a request from the Treasury select committee to release board minutes from meetings during the crisis. TSC chair Andrew Tyrie said the Bank’s refusal to cooperate with the request stopped the committee from properly doing its job of scrutinising the work of the Bank .
In September, Labour MP Alistair Darling who was Chancellor between 2007 and 2010 told the BBC’s Andrew Marr programme the Bank did not have “anywhere near an adequate understanding of what was going on in the banking system”. The disagreement on how to deal with the crisis in 2007 centred around the fact that Darling wanted to get money into the system to stop it freezing, while King was focused on the solvency of banks.
Darling added: “Now of course the two are related, but throughout the autumn of 2007 we did not deal with this as effectively as we could because of this disagreement.”