Mark Carney pushes ahead with Bank of England review
Mark Carney, Bank of England (BoE) governor, is pushing ahead with a strategic review of the central bank's resources and priorities, appointing McKinsey and Deloitte to advise how to transform the central bank.
Following an over-run of costs in the integration of the rump of the Financial Services Authority into the BoE this year, Charlotte Hogg, the bank's new chief operating officer, has launched a bank-wide effort to find duplication of tasks and strip out costs.
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Mr Carney hopes the changes will transform the institution, making it fit for its beefed up roles in monetary policy, financial stability and banking supervision.
McKinsey will lead a strategic review to guide the central bank's future investments and priorities, while Deloitte will review the efficiency of the support services division. Neither review will address policies the bank implements.
Mr Carney has regularly repeated his desire to modernise the BoE's operations. "Transformed responsibilities will mean a transformed institution," he told MPs in February outlining his desire for a "shared vision", maximised "synergies from the collection of policy functions" and lower costs of central support functions such as personnel and IT.
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Former BoE staff members suggested that in the enlarged bank, there was scope to merge the Financial Stability and Monetary Analysis directorates into a large economics unit serving both the Financial Policy Committee and the Monetary Policy Committee.
Some divisions, such as the teams looking at the banking system and prudential policy, within the Financial Stability wing of the bank were also seen to duplicate work undertaken by parts of the Prudential Regulation Authority, with significant scope for cost savings.
Ms Hogg outlined the approach in the latest minutes of the Court of the BoE, which are newly published after some of the internal reviews of the BoE last year.
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"Ms Hogg said that her intention for the strategic planning exercise for the Bank was to understand what had been done already, and to plot the approach for the future," the minutes said. "She wanted an outcome where choices on resource allocation could be made. The directors discussed the proposed scope of the review. This would be revisited in September."
The new chief operating officer has the status of the three deputy governors, but unlike them is not a member of the court and has to be specially invited to attend. The September court minutes are not yet published.
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The aim of the BoE reviews is not to cut costs, but to expand operations within existing budgets.
In a statement the bank said: "To ensure we can continue to fulfil our expanded set of responsibilities, the Bank has initiated a strategic review exercise to set out the priorities that will guide the organisation and frame the key initiatives we need to undertake in service [to] our mandate."
The most difficult issue will be reconciling salaries between staff members who were part of the old FSA, who are paid much more on average than staff who have always been part of the BoE. Top officials have denied that the discrepancy causes tensions, but other staff say the difference is a cause of tension within the new organisation.
The appointment of McKinsey and Deloitte was first reported by Bloomberg.