Carney Hires McKinsey for Bank of England Strategy Rethink

Bank of England Governor Mark Carney hired McKinsey & Co. and Deloitte LLP to review the central bank’s resources and identify cost savings after it took on expanded responsibilities.

McKinsey will work on a strategic plan examining the BOE’s priorities for the coming years and Deloitte will help conduct a “value for money” review focusing on operations including information technology and human resources, the BOE said today. Both companies were chosen after a competitive tender, it said.

The moves come just over three months since Carney took charge of the central bank in July, when he made the strategic plan one of his priorities. The review of resources will be led by Chief Operating Officer Charlotte Hogg, a former McKinsey employee, and follows the BOE gaining unprecedented powers to regulate the financial industry this year in one of the biggest revamps of the 319-year-old institution.

“The Bank of England plays a central role in the U.K. economy and financial system, and influences developments in the global financial system,” the central bank said in a statement released by a spokesman. It has an “expanded set of responsibilities” and the McKinsey review will guide “strategic investment decisions, working methods, and allocation of time and resources.”

Carney has already revamped the BOE’s monetary-policy function, introducing forward guidance and linking the benchmark interest rate to unemployment. In a question-and-answer session on the central bank’s Twitter page last week, Chief Economist Spencer Dale said the governor has “has new ideas, different perspectives.”

It’s “very healthy for the bank,” Dale said.

Future Course

Hogg began as COO on July 1 -- the same day as Carney -- after leaving Banco Santander SA. She started her career at the U.K. central bank before leaving in 1994 to join McKinsey in Washington.

The “intention for the strategic planning exercise for the bank was to understand what had been done already, and to plot the approach for the future,” Hogg said at a July 17 meeting of the BOE’s Court, according to the minutes. “She wanted an outcome where choices on resource allocation could be made.”

Hogg’s position was a new role at the level of deputy governor and was created to assist Carney in managing the BOE, which has now expanded to encompass parts of the former Financial Services Authority. She is the central bank’s most senior female employee.

Cost Overrun

“With so many responsibilities it’s actually hard to prioritize which is their really key problem,” said Rob Wood, a former BOE economist who now works at Berenberg Bank in London. “If you had to pick something out, it looks like monetary policy is starting to work and getting the economy moving now, so perhaps the key priority is to ensure the financial stability area is working efficiently.”

In April, the BOE’s then-finance director, Warwick Jones, said information-technology costs had been higher than forecast in the previous fiscal year. That was partly due to the integration of the Prudential Regulation Authority, and Jones said it would be “important to reverse” that as the merger was completed.

At the July Court meeting, officials noted that spending was slightly under budget in the current year and expected to stay that way, according to the minutes. They also said that income was below budget too.

The Deloitte value for money review will look for savings in the BOE’s Central Services budget. The central bank said it’s “incumbent” on the institution to be “as effective and efficient as we can be.”

Two people familiar with the reviews said the assessment may affect individual roles within the bank. The BOE will seek to find alternative positions for those employees, according to the people, who didn’t want to be identified because they are not authorized to speak publicly. The assessments are due to be completed next year, the people said.

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