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MENAFN - Kuwait News Agency (KUNA) - 03/11/2012

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(MENAFN - Kuwait News Agency (KUNA)) The "centralised and hierarchical" governance structure of the Bank of England (BoE) is damaging its effectiveness, according to three independent reports published here Friday.

Its "vulnerable" forecasting processes also lack detail and have become "noticeably worse" since the onset of the financial crisis, the reviews said.

The three reviews into the BoE's performance and capabilities were commissioned in May by the Court of the Bank of England, which manages the affairs of the bank but does not deal in monetary policy.

They focused on the Bank's handling of emergency lending at the height of the financial crisis, its forecasting record and its ongoing plans for providing support to the banking sector.

The reports were completed in October and released today after being discussed at a meeting between BoE officials.

In the first independent review, Ian Plenderleith, chairman of investment company (BH Macro) and a former Bank of England official, looked at the supply of emergency cash to the banks at the height of the financial crisis in (2008/09).

Meanwhile, Bill Winters, who sat on the Independent Commission on Banking, questioned the "robustness" of internal BoE governance.

Calling into question the bank's "centralised and hierarchical" system, he said that less senior BoE staff had "a tendency to filter recommendations in such a way as to maximise the likelihood that senior staff will find the recommendation palatable".

The final report, by David Stockton, the former statistics chief at the US Federal Reserve, probed the Bank Monetary Policy Commity (MPC) forecasting methods.

He said the events of the last five years has revealed some "vulnerabilities" in the bank's processes, adding they are not as accurate as those made by some external forecasters.

He also concluded the MPC's forecasting performance had become "noticeably worse" since the onset of the financial crisis.

The court's chairman Sir David Lees said in a statement: "When we commissioned the three reviews last May we had two particular objectives in mind.

"First, to learn practical lessons from past experience. Second, to examine ways in which the Bank may deliver more effectively its increased responsibilities in the future.

"The reviewers have provided us with a large number of constructive recommendations and options for further consideration." But the chairman of the Commons Treasury Committee Andrew Tyrie told BBC that the reviews were too little, too late.

"The decision to commission these reviews fell well short of what was required," Mr Tyrie said.

"A comprehensive review should already have taken place, not just to enable the Bank to learn from its past mistakes but also to inform the legislation currently before Parliament.

"The fact that it took so long to obtain even these reports illustrates the Bank's defective governance."


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