A letter to the editor of the ASI blog

Dear Sir,

I was interested to read the findings of Mr Benanke’s independent review into the Bank of England’s forecasting and related processes during times of significant uncertainty.

It was a detailed analysis with all recommendations accepted by the Bank of England.

Within this detail, was a list of shortcomings which focused on the deficiencies of the Bank’s forecasting infrastructure. These included: out-of-date software, insufficient resources to ensure the software and models are adequately maintained, significant shortcomings in COMPASS (the baseline economic model), makeshift fixes, over-complication, and unwieldy systems to highlight a selection of Bernanke’s findings.

As I read this list of points, it struck me that the Bank of England via the Prudential Regulatory Authority (PRA), regulates some of our largest financial institutions. If one of these institutions received similar points of note post a PRA review there would be consequences and certainly remedial action required.

This has been a tough period for the MPC and this report will make difficult reading for the Bank of England. The Bank of England is owned and ultimately regulated by the UK Government, and I hope they will take a similarly direct and stringent view as they review the report and action plan to fix. We have been reminded this week, with the Post Office enquiry, that taking “an arm’s length relationship” with wholly owned UK Government entities is not advisable.

Charles White-Thomson
Senior Fellow Adam Smith Institute