Charlotte Hogg, chief operating officer of the Bank of England since 2013, has rightly resigned from her new role as a deputy governor after yesterday’s stinging parliamentary select committee report assailing shortcomings in her ‘professional competence’. The wider question is how quickly the Bank can put the affair behind it and get on with its job of running monetary and financial policy.
Central banks across the world have greatly expanded policy responsibilities as well as policy activism since the global financial crisis. As unelected technocrats placed in, and carrying out, their jobs under the scrutiny of politicians and public opinion, central bankers are uneasily aware that enhanced power can significantly constrain freedom of manoeuvre.
Central banks have to obey, and be seen as obeying, appropriate rules of conduct governing issues like conflicts of interest, especially those they have set themselves. If they do not, the danger of setbacks, as the Hogg case shows, is very real.
Not just in the UK, but in many other jurisdictions too, central banks have come under fire for intervening either too much, or not enough, or in the wrong places, in economic and financial systems – and thereby allegedly enriching different parts of the population at the expense of others.
Mark Carney, the Bank of England governor, has faced additional criticism from supporters of the UK’s withdrawal from the European Union by appearing, before last June’s referendum, to back the Remain side. He has since succeeded in redressing the balance.
For all these reasons, Hogg was found culpable. The size of the offence was greatly exceeded by the symbolic valued of the perceive misdemeanour. But, in such cases, perception is everything. For all these reasons, Hogg had to step down.
Hogg admitted to having failed to tell the BoE’s governing ‘court’ that her brother was employed at a strategic planning unit at Barclays, one of the most important of the financial institutions that the Bank regulates. The rulebook she helped to write required senior Bank officials to declare their outside connections. She failed in 2013 to report that her brother holds a senior position which theoretically could involve a conflict.
This was a technical oversight, not deliberate concealment. Her brother’s employment was no secret. The Bank itself failed to point out this obvious omission, meaning no check was made of her declaration. The Bank was lax in vetting her form-filling – and she has taken the blame.
Hogg was not sacked but jumped. She broke her own rules on a technicality. Nobody believes she would have acted dishonourably, and she was good at her job. Yet the precedent of accepting blame is more generally disregarded. Ministers rarely resign when their departments make a mess of things. Central banks arguably have to fulfil even higher standards. Rupert Pennant-Rea, the Bank’s deputy governor in 1995 (whom Hogg’s mother, Sarah Hogg, then a senior adviser to Prime Minister John Major, played a major role in appointing in 1993) had to resign over a sexual misdemeanour.
She amplified her original error by misleading the select committee in a ‘pre-appointment’ hearing last month. She told the committee, wrongly as it transpired, that she had disclosed the information about her brother to the BoE as part of the internal code of conduct for which she as operating officer was responsible.
The committee ruled yesterday that her behaviour ‘falls short of the very high standards’ required to fulfil the additional responsibilities of deputy governor for markets and banking.
The news prompted her immediate resignation, with Carney saying he ‘deeply regretted’ the decision.
Hogg’s apologies could have been accepted to cover up the Bank’s responsibility for her omission. She did the right thing and set an example that others should follow.
David Marsh is Managing Director of OMFIF. Brian Reading was an Economic Adviser to Prime Minister Edward Heath and is a Member of the OMFIF Advisory Board.