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Openness - Bank of England

As the central bank of the United Kingdom, the Bank of England recognises that openness is a key institutional value. Although its history goes back to 1694, its approach to openness and its recognition of the connection between transparency and accountability have developed since the Bank formally became a public body in 1946 and increasingly so in recent years.

The Bank’s code of conduct, published in 2015 and refreshed this September, says:

"We want to be open and accountable to each other, to Parliament and to the people of the United Kingdom. We know our decisions and actions are subject to public scrutiny and we must welcome and facilitate that scrutiny.”

Under our Code, ‘being open and accountable’ is one of the five principles which bring our conduct policies together, alongside acting with integrity; creating an inclusive working environment; demonstrating impartiality and feeling empowered.

These principles are aligned with our mission – to promote the good of the people of the United Kingdom through maintaining monetary and financial stability – to the values that we expressed in our Strategic Plan launched in 2014 and to the Nolan principles of public life.

The Nolan principle of ‘openness’ is that holders of public office should act and take decisions in an open and transparent manner. Information should not be withheld from the public unless there are clear and lawful reasons for doing so.

Our Code captures the essence of this from the Bank’s perspective.

Publishing our Code is just one of many initiatives of the Bank in recent years to increase openness and promote accountability at the Bank of England - these reflect a cultural change in the Bank.

Following the Bank’s December 2014 report: ‘Transparency and accountability at the Bank of England’, the Bank’s Monetary Policy Committee minutes are now released alongside interest rate decisions, ending the drip-feed of information and allowing markets, businesses and the public to understand the MPC’s decisions immediately after they are made. On ‘Super Thursdays’ the MPC’s decision, the minutes and the Inflation Report are all released together.

The Bank is also committed to publishing, with appropriate lags, the transcripts and the audiotapes of those MPC meetings.

The Bank publishes the decisions and detailed records of its Financial Policy Committee as well as a bi-annual Financial Stability Report. Past minutes of the Bank’s ‘Court of Directors’ are also published by the Bank, including those which cover the key years of the financial crisis.

Steps have been taken to now include the public’s considerations in the design of our banknotes; a panel of independent experts consider suggestions to ensure the money in our pockets represents the preferences of the people and we consulted widely before introducing the polymer £5 note.

That this openness reflects a substantial change of culture is best illustrated by contrast with a principle espoused in the first half of the 20th century by the Bank’s longest serving Governor, Lord Montagu Norman: "never explain, never excuse”.

However, as the Bank gained new and important responsibilities in respect of monetary policy in 1997, it recognised that independence and accountability go hand in hand, furthermore, that increasing openness was important for policy reasons. That year, Governor Mervyn King, during a lecture at the London School of Economics, said

"A more predictable monetary policy – not in the sense of stable interest rates, but rather a predictable reaction of interest rates to developments in the economy – reduces the "noise” injected into the system by the policy itself.”

He went on to say:

"… transparency should lead to policy being predictable. It is all part of the view that a central bank should be boring, a referee whose success is judged by how little his decisions intrude into the game itself.”

The financial crisis gave reason to reflect further about the role of central banks. Current Governor Mark Carney drew attention to the importance of both monetary and financial stability in his Mais Lecture at Cass Business School in 2014:

"Both are fundamentally about maintaining the public trust and confidence in money and financial intermediation that are essential for them to oil the wheels of commerce. That trust and confidence can be undermined through a loss of certainty about the future value of money, a loss of confidence in financial intermediaries, or ultimately a loss of faith in the financial system.”

The Bank’s initiatives about openness recognise that transparency is essential for legitimacy and effectiveness in maintaining public trust and confidence, as Governor Carney explained:

"Transparency and openness are central not just to our legitimacy to perform these new tasks on behalf of the citizens of the United Kingdom. They are also central to our effectiveness in performing them. Just as Governor King described in his Mais Lecture 9 years ago, openness about what policy is seeking to achieve can make it more effective.”

Through our strategic plan, we will also increase the transparency of our work on financial stability. We will publish the results of regular bank stress tests. As with monetary policy, we also intend to publish more of the research and analysis underlying our policy choices. Over time, the financial sector will be better placed to anticipate our responses and as with monetary policy, increased transparency will make us not just accountable, but also more effective.”

Having quoted three Governors of the Bank of England, to explain the move from institutional ‘constructive ambiguity’ to openness over time, two further initiatives deserve mention.

For over a year, staff at the Bank have been maintaining a blog – the Bank Underground. This is for Bank staff to share views – not for the Bank or the policy committees to give a view. Staff are able, perhaps tacitly encouraged, to challenge prevailing policy orthodoxies – a significant development in openness. It has already had over 375,000 hits.

And, most recently, the Bank has launched a new website KnowledgeBank that seeks to inform and engage the public on the Bank and its role within the economy through a series of digital guides – as part of opening up a dialogue with the public about what the Bank does. Digital articles are jargon-free and cover questions such as ‘Will there be another financial crisis?’, ‘Can you stop a bank from going bust?’, ‘Will cash die out?’ and ‘How much gold is kept in the Bank of England?’.

Duncan Cromarty

Head of Compliance
Duncan Cromarty is Head of Compliance at the Bank of England.

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