The Treasury Select Committee has slammed the court of the Bank of England as “reactive”, “back-covering” and “unworthy” following the publication of details of meetings held during the financial crisis.
The Bank of England today released minutes of meetings which took place at the height of the crisis between 2007 and 2009. The TSC has been calling for their publication since 2011.
TSC chair Andrew Tyrie says the minutes show that during the crisis the Bank “did not have a board worthy of the name”.
He says: “The court should have been able to provide effective challenge to the executive, and to make clear that, where appropriate, it would conduct retrospective reviews of Bank policy and performance.
“There is little evidence that the court attempted either. It was of little or no use as a forum for constructive challenge.”
The minutes show that at the start of the Northern Rock crisis in September 2007, the executive said “the sense and strength” of the tripartite relationship between the Treasury, the Bank and the FSA had been proven.
But by March 2008 the governor told the court the tripartite system “was not sufficiently workable or relevant to managing a crisis”.
Tyrie says the non-executives did not ask for an explanation for this change in view.
He says: “The court does not appear to have taken the initiative to examine the crucial issue of how strong and effective the tripartite relationships were proving to be. Those relationships were later found to be seriously wanting.”
Tyrie adds the court did not challenge the executive strongly, and sometimes acted more as “cheerleaders” for its views.
The minutes show the court expressed concerns about the level of information they were receiving and whether they were fulfilling their fiduciary duties.
Tyrie says: “When it became evident that there was a deep financial stability problem, the non-executive directors demanded more information. These instances of back-covering consumed the Bank’s time.”