BankofEngland
TheBankofEnglandisthecentralbankoftheUnitedKingdom.ItisresponsibleforthemonetarypolicyoftheUnitedKingdomthroughtheMonetaryPolicyCommittee(MPC).
TheBankofEnglandisoneofthemostimportantinstitutionsandbuildingsintheLondoncity.SincethecreationoftheBankofEnglandin1694,theBankofEnglandbegantooperate,andthengraduallychangeditsfunctions.Since1694,asthecentralbankoftheUnitedKingdom,itisthelargestandbusiestfinancialinstitutionintheworld.VisitorscanappreciatethedevelopmentprocessintheMuseumoftheBankofEngland,whichisworthyofthe"financialcenter".
TheBankofEngland(BankofEngland)isthecentralbankoftheUnitedKingdom.TheBankofEnglandhasalwaysactedasthebankoftheEnglishgovernmentandisresponsibleforthecountry’smonetarypolicy.Itsfunctionalinstitutionsaredividedintopolicyandmarket,financialstructureandsupervision,andbusinessandservice.
IntroductioninEnglish
TheBankofEnglandisthecentralbankoftheUnitedKingdom.Sometimesknownasthe'OldLady'ofThreadneedleStreet,theBankwasfoundedin1694,nationalisedon1March1946,andgainedindependencein1997.StandingatthecentreoftheUK'sfinancialsystem,theBankiscommittedtopromotingandmaintainingmonetaryandfinancialstabilityasitscontributiontoahealthyeconomy.
Historicalevolution
BeforetheestablishmentoftheBankofEngland,theBritishroyalfamilytriedeverymeanstoborrowmoneyfromtherichandaristocraticfeudallordsinLondon.Atthattime,theWangfamilyhadatreasuryandmintbureau,wheretherichwouldstoregoldandsilver.Oneoftheroyalfamily’smisdeedswasthattheyrefusedtoredeemthegoldcoinsthatpeoplekeptthere,whichwasactuallyembezzlingcustomerdeposits.Inthe"NineYearsWar"inBritainandFrance,theking'sministerinchargeprintedgovernmentbondsandsoldthemdirectlytomerchants,promisingtopayinterest,andallowingmerchantstousesuchfinancialbondstopaytaxes.However,thetermoftheseloanswasveryshort.AftertheMinisteroftheSealdidnotfulfillthepromiseofinterestpaymentseveraltimes,themerchantswerenolongerwillingtopaytobuyfiscalvouchers.Inthisway,thekingwhohaslosttherighttoincreasetaxesisexhausted.
TheprimitivefinancialbusinessintheCityofLondonhasbeendevelopingslowlyafterQueenElizabethI(1558-1603),adaptingtotheneedsoftradepayments.Bytheendoftheseventeenthcentury,merchantswereplanningtoestablishabanksimilartoaDutchinstitution.Thegovernment’splightprovidesthemwithaperfectopportunity.Theyareunwillingtolendmoneytotheroyalfamilyseparately,butwanttobankthegovernment’sdirectlendingfunction.
ThepersonontheBankofEnglandclausewhocameforwardtoorganizenegotiationswiththegovernmentisWilliamPaterson,aScot.ButtherealoperatorisSirJohnHoublon,aveteranbusinessmagnateinLondon.TheBankofEngland’sproposalwasquicklyapprovedbyCongress,andtheKinggrantedaroyalcharter(RoyalCharter),allowingthebanktobreakthroughthelegalprovisionsofthetime,establishajointstockcompanywithanunlimitednumberofpeople,andestablishawell-capitalizedfinancinginstitution,providedthatLendmoneytothegovernmentforalongtime.Afewdaysafterobtainingtheconcession,1,208shareholdersintheCityofFinanceraised1.2millionpoundsinjusttwoweeks.Thegovernmentagreestoanannualinterestrateof8%andpaysthebankanannualmanagementfeeof4,000pounds.Itonlytookhalfayearforthemoneytobefullywithdrawnbythegovernment.Scholarswhodescribethe"NineYearsWar"havewrittenthattheequipmentoftheBritishsoldiersonthefrontlinehassinceenviedtheFrench.
Fromtheperspectiveofbankingbusiness,theestablishmentoftheBankofEnglandisnotabreakthrough.TheloannotebusinessitisengagedinhasprecedentsintheNetherlands.ItissaidthatthebankestablishedinSwedenin1657initiatedthetraditionoffinancingservicesfortheroyalfamilyandissuedaunifiedcurrencywithafixedamount.Intheserespects,theBankofEnglandisanoutstandingimitatorwithtransformationandcomprehensivecapabilities.ItsimitationobjectsaremainlytheDutchjoint-stockBankofAmsterdamestablishedin1609.ThenewKingWilliamIIIfromtheNetherlandsisfamiliarwiththismechanism.However,theBankofAmsterdamwasnotestablishedfortheroyalfamilynorforthewar.Itservesemerginginternationalcommerce,includingtheDutchEastIndiaCompany,andlaterexpandedtotherepublicangovernmentoftheUnionProvinceoftheNetherlands.Itcreatedfinancialinstrumentssuchasdepositaccounts,bookkeepingcurrencies,andoverdraftcredits.
Despitebeingimitatedintermsofinstitutionaldesignandbusiness,theBankofEnglandsurpasseditspredecessorsandbecameamilestoneinthehistoryoftheindustry.Thisisfirstlybecauseitisdevelopingapowerfulnewclient—theBritishroyalfamilyandgovernment,anditwillnevergobankrupt.Afterthe"GloriousRevolution",EnglandtooktheleadinrealizingpoliticalstabilityamongWesterncountries.Therewasnocivilwaragain.Ithadbidfarewelltoimperialpowerandtheturmoilofregimechange,andcouldconcentrateondealingwithexternalchallengesandcontendingforworldhegemony.
Doingitsbusinessisaperfectmarriageofthefinancialcity'sstrongfinancialresourcesandambitiouspower.Secondly,thecustomer’sneedswereoverwhelming,becauseitfoughtagainstothercountriesindifferentpartsoftheworldaftertheseventeenthcentury.Exceptforthe"NineYears'War":-betweenWilliamIIIandFrenchKingLouisXIV.From1756to1763,Britainfoughtthe"SevenYearsWar"withFranceandseizedFrenchcoloniesintheAmericas.ItfoughtagainsttheNetherlands,Spain,theMughaldynastyofIndiaintheEast,andtheAmericansfightingforindependencein1775.Attheendoftheeighteenthcentury,itfoughtagainstNapoleonofFrance.AlthoughthewargaveBritainadvantagesintradeandcolonization,andmoneywasflowingtotheUnitedKingdom,themorethegovernmentreliedonthefinancialsupportoftheCityinVietnam,themoreborrowingsgrew.Historiansbelievethatfromthe17thtothe18thcenturyBritain’spopulationandeconomicstrength,FrancewasbetterthanthetwoBritains.Atthattime,thepopulationofFrancewasnearly20million,threetimesthatoftheUnitedKingdom.ThesupportofmodernfinanceisregardedasoneoftheimportantcornerstoneswhyBritainfinallydefeatedFranceandachievedworldhegemony.
TheestablishmentoftheBankofEnglandisamajorstepforwardinthecreditrelationshipbetweenthepublicandthegovernment.Inthepast,thegovernment'sdebttotheprivatesectorwasaseparateagreement.Thegovernmenthastherighttoviolateregulationsandtherulesarenottransparent.Nowitisthegovernmentthatdoesbusinesswithanorganization,formallysignsacontract,andrestrictseachotherinbusinesstalks.Thisbankmustbeprivatelyownedinordertoactasapartywithdifferentinterestsfromthegovernmentandensurethefairnessandsafetyoftransactions.TheshareholdersoftheBankofEnglandarepursuingprofits,buttheyalsovaluetheriseofamajorBritishempireintheworldandthepromotionoftradeandcolonizationgloballybasedontheprinciplesofBritishliberalism.Thisisinseparablefromthepowerofthestateandthegovernment.Forthegreaterlong-termbenefit,businessmenarewillingtoformallianceswiththegovernment.
TheBankofEnglanddidnotthinkofcontrollingthepermanentdebtsofthekingandthegovernmentatthetime,butthelatterwasbeggingtheformertorescuetheurgentneed.Asabargainingcondition,thekinggavetheBankofEnglandatime-limited"concessionright":after11years(1706),oncethegovernmentpaidofftheinitialloan,therighttooperatewouldberecovered.IwanttoemphasizeherethattheBankofEnglandatthistimedidnothavetheresponsibilityofstabilizingfinance,currency,economy,andforeigntrade.Theseconceptsdidnotexistatthattime.ThebanknotesissuedbytheBankofEnglandlaterreplacedthedirectfiscalbonds,andtheywerenotnationalcurrencies.Ithasbecomeaso-called"centralbank"andthereisstillalonghistoricalprocess.
Theearliestcentralbankformedintheworldistheoriginatorofthecentralbanksystemofvariouscountries.In1694,itwasestablishedunderthecharteroftheKingofEngland,withasharecapitalof1.2millionpounds,whichwasraisedfromthesociety.Atthebeginningofitsestablishment,itobtainedtherighttoissuebanknotesnotexceedingthetotalcapital,andthemainpurposewastoadvancethegovernment.By1833,theBankofEnglandwaseligibleforunlimitedbanknotes.In1844,theBritishParliamentpassedtheBankingFranchiseRegulations(theBillRegulations),stipulatingthattheBankofEnglandisdividedintoanissuancedepartmentandabankingdepartment;theissuancedepartmentisresponsibleforthetotalissuanceof14millionpoundsofsecuritiesandunnecessarymetalstorageinthebusiness.Bankbondsofequalamount;thequotasfortheissuanceofotherbanksthathaveobtainedtherighttoissuearealsostipulated.
Sincethen,theBankofEnglandgraduallymonopolizedthecountry'scurrencyissuancerights,andin1928becametheonlyissuingbankintheUK.Atthesametime,theBankofEngland,withitsever-increasingstatus,undertakestheassignmentandwrite-offofthedebt-to-debtrelationshipbetweencommercialbanks,andthefinalsettlementofbillexchanges.Whentheeconomyisbooming,itacceptsbillsrediscountingfromcommercialbanks,andishitbytheeconomiccrisis.Itactsasthe"lenderoflastresort"ofcommercialbanks,thusgainingthetrustofcommercialbanksandfinallyestablishingthestatusof"bankofbanks".
AsLondonbecametheworld'sfinancialcenter,inresponsetoactualneeds,theBankofEnglandformedaflexiblerediscountpolicyandopenmarketactivitiesandotherregulatorymeasures,whichbecamethemodelandfoundationofmoderncentralbanktheoryandbusiness.InJuly1933,the"ForeignExchangeStabilizationAccount"wasestablishedasanagentfortheTreasury.After1946,theBankofEnglandwasnationalizedandremainedacentralbank.ItwassubordinatetotheMinistryofFinance.Itcontrolledtheaccountsofthetreasury,discountcompanies,banksandotherprivatecustomers,andassumedthemanagementofgovernmentdebt.ItsmaintaskwasstillthegovernmentItisrequiredtodeterminethenationalfinancialpolicy.
TheheadofficeoftheBankofEnglandislocatedinLondon.Thefunctionalinstitutionsaredividedintothreeparts:policyandmarket,financialstructureandsupervision,businessandservice,andsetup15bureaus(departments).Atthesametime,theBankofEnglandalsohas8branchesinBirmingham,Bristol,Leeds,Liverpool,Manchester,Southampton,NewcastleandLondonCourtDistrict.
BankFeatures
TheBankofEnglandenjoystheprivilegeofissuingbanknotesinEnglandandWales.ScotlandandNorthernIrelandareissuedbygeneralcommercialbanks,butbanknotesissuedbyEnglandareusedasbanks.Thelenderoflastresort,keepsthedepositreservesofcommercialbanks,andactsasasettlementbankforbills,supervisingBritishcommercialbanksandotherfinancialinstitutions;asagovernmentbank,actingasanationaltreasury,stabilizingthevalueofthepoundcurrency,andparticipatinginallinternationalaffairsonbehalfofthegovernmentFinancialinstitutions.
Therefore,theBankofEnglandhasthecharacteristicsofatypicalcentralbank's"issuingbank,bank'sbank,andgovernment'sbank".TheBritishgovernmentusesgovernmentbondstoborrowmoneyfromtheBankofEngland,andtheBankofEnglandusesitsowncurrency(poundsterling)topurchaseBritishgovernmentbonds;thisgovernmentbondisavoucherforfuturetaxation,andtheholdingofgovernmentbondsbytheBankofEnglandmeansthatitwillreceivefuturegovernmenttaxes.
IftheBritishgovernmentwantstobuybackthenationaldebtincirculation,itmustbuyitbackwithgoldcoinsortheequivalentcurrencyrecognizedbytheBankofEngland(currencycanbeexchangedforgold).ThecurrencyissuedbytheBankofEngland(thepoundsterling)wasformerlyknownasbanknotes,whichareactuallyreceiptsforgoldcoinsdepositedbydepositorsingoldsmiths’custody.Duetotheinconvenienceofcarryingalargenumberofgoldcoins,everyonebegantotradewiththereceiptofgoldcoins,andthenexchangedthecorrespondinggoldcoinsfromthegoldsmith.
Foralongtime,peoplefeelthatitisunnecessarytoalwaysgotogoldsmithstodepositandwithdrawgoldcoins.Later,thesereceiptsgraduallybecomecurrency.Theso-calledgoldstandardsystemisamonetarysystembasedongold.Underthegoldstandard,orthevalueofeachunitofcurrencyisequivalenttoacertainweightofgold(thatis,theamountofgoldinthecurrency).BecausethecirculationandacceptanceofthebanknotesissuedbytheBankofEnglandarerelativelywide,thebanknotesaredefaultedtobethenationalcurrency.
Therefore,theBankofEnglandcanuseitsbanknotestopurchasenationaldebt,whichwilllaterbecalledthecurrencyincirculation.Itcanbeconsideredthatthenationalcurrencycanbeexchangedforgovernmentbonds,providedthatitcanbeconvertedintogoldcurrencyorequivalent;thegovernmentbondscanonlybeusedtocollectinterestfromthegovernment,andcannotbeconvertedintogoldorcurrency,becausethegovernmentbondsare"permanentdebts"ofthegovernment.
BankingInstitutions
ThegoverningbodyoftheBankofEnglandistheboardofdirectors.Itiscomposedofthepresident,vicepresidentsand16directors.Itisthehighestdecision-makingbody.ThemembersarerecommendedbythegovernmentandappointedbytheKing.Meetingatleastonceaweek.
Thetermofofficeofthechairmanandvicepresidentsis5years,andthedirectorsare4years.Theyresigninrotation,and4peopleresignattheendofFebruaryeachyear.Theboardofdirectorselectsanumberofpermanentdirectorstopresideoverthebusiness.Therearefivespecialcommitteesunderthecouncil:standingcommittee,auditcommittee,personnelandtreasurycommittee,andbankbondprintingcommittee.DirectorsmustbeBritishnationalsandunder65yearsofage,butmembersoftheHouseofCommonsandgovernmentstaffarenotallowedtoserve.
Executives
ThecurrentPresidentoftheBankofEnglandisMarkCarney(MarkCarney),whosucceededtheformerPresidentMervynKingonJuly1,2013.ForthepostofSirGrace,thetermofofficeis5years.Thisisalsothefirstforeigngovernorinthe318-yearhistoryoftheBankofEngland.
Relatedinformation
Interestratehike
TheBankofEngland(theBankofEngland)unexpectedlyraisedtherepurchaserateby25basispoints,sinceAugust2007The3rdinterestrateincrease.TheBankofEngland'smoveisintendedtocontroltheacceleratinginflation.Sofar,theUK'srepurchaseratehasreached5.25%,whichisthesameastheUSfederalfundsrate.
BeforetheMonetaryPolicyCommittee(MPC)meeting,fewpeopleexpectedtheBankofEnglandtoraiseinterestrates.SomeanalystsbelievethattheremarksmadebytheBankofEnglandindicatethatthecentralbank'sinterestratehikewillcontinue.
TheBritishpoundagainsttheU.S.dollarjumped157pointsfrom1.9378to1.9533within20minutesofthenews.TheBankofEnglandstatedinastatementissuedafterthemeetingthat“domesticdemandisgrowingsteadily,creditandbroadmoneyarestillgrowingrapidly,andtheeconomy’sremainingcapacityislimited.Inflationwillrisefurtherinthenearfutureandcontinuetobehigherthantheinflationtarget.AsofNovember2006Comparedwiththereleaseofthe"BankofEnglandInflationReport",theriskofrisinginflationisnowgreater."
Interestratesunchanged
TheBankofEnglandMonetaryPolicyCommitteeannouncedtheDecemberinterestrateresolutiononDecember5,2013,maintainingthebenchmarkinterestrateof0.50%unchangedandmaintainingassetsof375billionpoundsThepurchaseplanremainsunchanged.
Sincethe50basispointcutonMarch5,2009,theUKhasmaintaineditsbenchmarkinterestrateatarecordlowof0.50%;OnJuly5,2012,thepurchaseof50billionpoundsofassetsincreasedthetotalscaleofQEby375billionpounds.
TheBankofEnglandwillannouncetheminutesofthemeetingonDecember18.
RescueNorthRock
In2007,theBankofEngland,thecentralbankoftheUnitedKingdom,announcedthatitwouldprovidefinancialassistancetoNorthRockBank,whichwasinfinancingdifficultiesamidsttheglobalUSsubprimemortgagecrisis.NorthRockBankannouncedthatits2007earningswillbeabout20%lowerthanexpected.ThenewscausedalargenumberofbankdepositorstolineuptowithdrawdepositsinBeiyanBank.
TheBritishgovernment,theBankofEnglandandtheBritishMonetaryAuthorityissuedajointstatementstatingthatthegovernmentauthorizedthecentralbanktoprovidefinancialassistancetoNorthRockBank.
NorthRockBanksubmittedanapplicationforfinancialassistancetotheCentralBank.TheBankofEngland,theUKTreasuryDepartmentandtheMonetaryAuthorityheldanemergencymeetingthatnightandagreedtotheNorthRockBank’sapplication,butdidnotdisclosethespecificamountoffundsprovidedtoit.ThisisthefirsttimethattheBankofEnglandhasinvestedto"rescue"atroubledbanksinceitstartedtoindependentlyadjustinterestratesin1997.
NorthRockBank,headquarteredinNewcastle,northwestEngland,isthefifthlargestmortgagelenderintheUnitedKingdom.Buyersprovidemortgages.However,NorthRockBank's"goodperformance"inthemortgagemarketencountered"Waterloo"becauseoftheUSsubprimemortgagecrisisandhadtoaskthecentralbankforhelp.
Subprimertgagespread
NorthRockBankisthefirst"victim"oftheBritishfinancialindustrytobe"dragged"bytheUSsubprimemortgagecrisis.Unlikemostbanks,whichrelyondepositsfromdepositorstoprovidemortgageloanstohomebuyers,BeiyanBankmainlyreliesonborrowingfromotherbanksandsellingmortgagesecuritiesinthefinancialmarkettoraisefunds.Therefore,ithasbetter"resistanceability"inthesubprimemortgagecrisis.weak.
TheU.S.subprimemortgagecrisishashittheworld.Duetoconcernsabouttheexpansionofthesubprimemortgagecrisis,investorswilltighteninvestment,thecreditmarkethasshrunk,marketliquidityhasdeclined,andinter-banklendingamongpeershasdroppedsignificantly,andlendingrateshaverisenaccordingly.Thisblowhitthe“fategate”ofBeiyanBank.Althoughtherearefewsubprimeornon-performingloansintheloanstructure,theprofitabilityofBeiyanBank,whichhasencountereddifficultiesinthefinancingmarketandmortgagesecuritiesmarket,hasstillbeenhithard.Sincethebeginningofthisyear,BeiyanBank’ssharepricehasplummetedbyabout50%.Itdroppedby30%onthe14th.
ThecrisisofNorthRockBanktriggeredaseriesof"earthquakes"intheUKstockmarket.ThesharepricesofmajorUKmortgagelenderssuchasUnion-Leicester,Bradford-BentleyandParagonhavefallen,amongwhichParagon’ssharepricehasfallenby25%.Bytheendoftheafternoon,theaveragepriceindexof100stocksintheFinancialTimesoftheLondonstockmarketfellbyabout1.2%fromtheprevioustradingday,closingat6289.3points.
Queueforwithdrawal
AccordingtothefinancialcompensationregulationsintheUnitedKingdom,ifabankfails,depositorswithadepositoflessthan£2,000(approximatelyUS$4,000)canbefullycompensated.However,ifthedepositexceeds2,000pounds,theupperlimitofcompensationis35,000pounds,andthepartexceeding2,000poundscanonlyget90%compensation.Inotherwords,saverswith35,000and350,000poundsmayendupwithonly31,700poundsincompensation.
Thecentralbank'sfundingto"rescue"theNorthRockBankhasmadeBritishdepositorswithdepositsinthisbankextremelynervous.FromLondontoNewcastle,therewerelonglinesatthegatesofNorthRockBankbranches,anddepositorsrushedtowithdrawmoney.InNewcastle,therewasevenachaoticsceneofdepositorsfightingforthepositionoftheteam.
Inordertostabilizepeople’shearts,theBritishChancelloroftheExchequerAlistairDarlingtoldtheBBC:“Thefinancialsystemhasenoughmoney,andeverybankhasmoney...Theyjustdon’twanttoborrowshort-term.,CausingNorthRockBankandotherinstitutionstoencounterfinancingdifficulties.”ThejointstatementoftheBankofEngland,theMinistryofFinanceandtheMonetaryAuthorityoftheUnitedKingdomalsostated:“TheMonetaryAuthorityhasdeterminedthattheBankofNorthRockissolvency,thecapitalexceedstheprescribedrequirements,andtheloanqualityisgood.”DepositorsThereareapproximately24billionpoundsindepositsatNorthRockBank.
Butsaverswhoseowndepositsarethreateneddon'tthinkso.JohnDuncanwithdrewalldepositsfromNorthRockBank.HetoldReuters:"Today'snewspapersarefullofheadlineslike'NorthRockBankcashemergency'.Whatwillyoudoifyouwanttodepositmoneyhere?"
CarneyTimes
TheeraofCarneyiscoming.TheBankofEnglandisabouttousherinachange
ThenewGovernoroftheBankofEngland(BOE)MarkCarney(MarkCarney)inJuly2013Officiallytookofficeonthe1st.AtthesametimethattheBankofEnglandannouncedthearrivaloftheCarneyera,theBankofEnglandisexpectedtoundergomajorchangesinpersonnelandpolicies.
AsCarneywasabouttotakeoffice,DeputyPresidentPaulTuckerofferedtoresign.GiventhatTuckerlosttoCarneyinthecompetitionforthenewpresident,hisdepartureisnotunexpected.
However,anotherdeputygovernor,CharlieBean,willstepdownattheendofJune2014,whichmeansthatthreeofthecentralbank’sfourtoppositionswillsoonchangehands.AllofthiscomesatatimewhenthecentralbankisgivenawiderangeofnewpowersandtheUKisfacinghugeeconomicchallenges.Forthecentralbankingsector,whichhasalwaysactedsteadily,thislooksnolessthanachange.
TuckerwillcontinuetostayattheBankofEnglanduntilthisfalltoassistCarneyinthehandoverofwork.Therefore,theoutlookfortheUK'squantitativeeasingpolicywillnotchangeintheshortterm,especiallygiventherecentimprovementinUKeconomicdata.Recently,asmallnumberofofficialswithintheBankofEnglandvotedfortheexpansionofthegovernmentbondpurchaseplan,butTuckerisnotoneofthem.
ThemostimportantrecenteventoftheBankofEnglandisitsinflationreportscheduledtobereleasedonAugust7,2013.TuckerandBienwillalsoattendthereleaseofthisreport.ThisreportwillrespondtotherequestoftheBritishChancelloroftheExchequerGeorgeOsborne;OsborneaskstheBankofEnglandtoconsiderfollowingtheexampleoftheUSFederalReserve(Fed)settingthresholdsforinflationexpectationsandunemployment,basedoneconomictrendsTomakepolicycommitments.
However,bymid-2014,thesituationattheBankofEnglandwillbeverydifferentfromnow.Thecentralbankhasbeengivennewpowerstosupervisedomesticbanksandhasadoptedso-calledmacro-prudentialpolicies.Therefore,changesintheBankofEnglandwillnotonlystopatthepersonnellevel.WhoeversucceedsTuckerasthedeputygovernorofthecentralbankresponsibleforfinancialstabilityaffairswillplayakeyroleindetermininghowtheBankofEnglandsuccessfullyassumesthesenewresponsibilitiesinthefuture.
Atpresent,itseemsthatthemarketmaynotbedisturbedbyTucker'sdeparture.Butovertime,itwillbecomeimportantwhoOsbornechoosestosucceedTuckerandBien.Afterall,thenewmanagementoftheBankofEnglandmusttakeuptheresponsibilitytocompletethereformoftheBritishfinancialsystem,ensurethattheeconomicrecoverydoesnotdeviatefromthetrack,andhelptheBankofEnglandsmoothlyexitthecurrentultra-loosemonetarypolicy.Thesetasksarenoteasy.
ThreechangesthatCarneywillbring
Firstofall,Carney’smessagedeliveryisexpectedtobemoreclearthanthatofMervynKing.
TheBankofCanada’shandlingofthefinancialcrisisundertheleadershipofCarneyhasbeenwidelyacclaimed.Atfirst,theBankofCanadapromisedtoimplementlowinterestratesforalongtimeandclearlyexplainedtheguidelines.TheBankofEnglandhasnevermadesuchstatementsaboutthefuturedirectionofinterestrates.JinEnhasalwaysadoptedapassiveattitudetowardsproposingestimatesandemphasizedthatitisimpossibletoknowthepossibledevelopmentdirectionofeconomicgrowthandinflation.Carney(andFederalReserveChairmanBenBernanke)madetheirviewsonlonger-termeconomicprospectsmoreexplicitasawayofinfluencinglong-terminterestrates.
Secondly,whatneedstobeassessedishowCarneymanagestheMonetaryPolicyCommittee(MPC)withfouroftheninemembersbeingoutsiders.
Fromtheperspectiveofthissituation,itisnotsurprisingifthepresidentfindshimselfunabletoobtainsufficientsupportvotes.JinEunoriginallyplannedtopromotetheexpansionofmoneyprintinginJune,butherepeatedlylostintheMPCvote.InCanadaandtheUnitedStates,theGovernor/Chairman’swishisoftentakenforgranted,butintheUnitedKingdom,thestandardprocessisopenlydebatedandfacingopposition.
Finally,Carneymaybereluctanttopresstheswitchofquantitativeeasing.
TheBankofCanadadidnotseektoprintmoneybecauseitdoesnotneedtodoso.However,CanadahasfelttheimpactofquantitativeeasingfromtheappreciationoftheCanadiandollar.AlthoughCarneyhassaidthatquantitativeeasingintheUnitedStatesbrings"netbenefits"toCanada,heisalsokeenlyawarethatquantitativeeasingoftenworksthroughcurrencydepreciation,leadingtoexchangeratefrictionswithtradingpartners.
Onthewhole,Carneymayimplementmorestringentmonetarypolicydiscipline.Perhapshewilldeclaretomaintainlowinterestratesforalongerperiodoftime,bringaclearermodeofcommunication,andreducethepossibilityofexpandingquantitativeeasing.