Carney’s BOE Tenure Faces Awkward Moment as Closest Ally Departs

  • Deputy governor Charlotte Hogg leaves bank after criticism
  • BOE now needs two policy makers and a chief operating officer

BOE's Hogg Steps Down After Parliamentary Criticism

Mark Carney has lost his closest ally at the Bank of England at an awkward time.

Charlotte Hogg’s omission of a family link to Barclays Plc has cost her one of the top positions at the institution, with a hand in setting interest rates, monitoring Britain’s financial industry and day-to-day operations of the central bank. What she called an “honest mistake” also deprives the BOE governor of a key deputy; Hogg was his first appointment and oversaw the monumental revamp he started shortly after taking over.

Charlotte Hogg

Charlotte Hogg

Photographer: David Levenson/Bloomberg

The controversy at the BOE exploded in the same month as the central bank braces for the government to formally trigger Brexit. That will start at least two years of talks that will have implications for trade, inflation, the exchange rate and the current account, all of which will have consequences for both the setting of interest rates and the supervision of financial institutions.

“It’s the last thing the bank would want, at this delicate moment for the country,” said Stefan Stern, a management specialist at the High Pay Center, a think tank that monitors pay at the top of the income distribution. “It’s unfortunate, to say the least, because she’s a really capable person.”

The loss of Hogg also has implications for the structure of the BOE itself as Brexit piles on additional work and makes it harder to meet spending targets. As Carney’s previous three-year revamp -- led by Hogg -- comes to a close, he’s planning another overhaul to address some of those pressures.

Two Roles

Hogg, 46, was both chief operating officer and, for the past two weeks, deputy governor for markets and banking. Her rapid promotion prompted speculation that she might succeed Carney as governor when he departs in 2019.

Now, Carney will have to find another COO, and the Treasury is on the search for two new interest rate setters. Kristin Forbes, the only other female member of the Monetary Policy Committee, is leaving the bank at the end of June.

Hogg arrived from Santander in 2013 and rose to deputy governor this month. The reversal of fortune kicked off at her appointment hearing before lawmakers in late February, when she revealed that her brother, Quintin Hogg, is a director at Barclays, a fact she didn’t disclose four years ago.

That revelation prompted a subsequent grilling of the chair and deputy chair of the BOE’s governing body and, ultimately, a report from lawmakers that Hogg’s “professional competence falls short of the very high standards required.” Shortly after that report was released on Tuesday, the BOE said Hogg was stepping down.

Public Trust

In her resignation letter, Hogg said she never breached any confidence but recognizes that her failure could threaten public trust in the BOE. She had told the hearing on Feb. 28 that she had always declared potential issues.

Hogg’s downfall brings more unfavorable attention to the bank after a year in which it was criticized for exaggerating the economic risks of Brexit and worsening economic inequality with ultra-loose monetary policy.

The crisis also raises questions over the central bank’s governance, which have been criticized in the past, and lawmakers will review what its governing body does to avoid a repeat of the latest situation. The bank said Tuesday it’s commissioned a review of policies, the results of which will be made public, and it’s also changing reporting structures to “safeguard more effectively the governance of its code of conduct.”

Hogg is not the first BOE figure to face criticism from the Treasury Committee in recent years. Lawmakers twice raised concerns about Financial Policy Committee member Clara Furse, who stepped down from the role last year. In 2015 policy maker Gertjan Vlieghe was pressured to sever ties with Brevan Howard Asset Management to avoid the impression of a conflict of interest. Lawmakers criticized the BOE’s code of conduct at the time.

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