As a post-script to my previous blog on the UK history of the financial crisis, it’s possible to reflect that the carve out of the FSA in 1997 from the Bank of England, and the subsequent re-incorporation of [most of] it as the PRA in 2012 had other imperatives [than the role of the old architecture in old events].
The 1997 carve-out must have been partly guided by the priority assigned to giving independence over monetary policy to the Bank of England. Handing so much new power to an unelected institution required a counter-balance to make it politically acceptable. So some things were taken away: supervision and debt management.
Part of the reason too, in my assessment, is that it allowed Labour to look like it was solving a problem created by the previous government’s neglect.
And this too must have crossed the minds of the Coalition government’s masterminds when it re-incorporated supervision back into the Bank of England following the 2010 election.
Rearranging chairs is easy to propose, and was a way to pin the blame for the crisis on New Labour’s neglect of financial stability, and its rash 1997 chair-shuffling. Something had to be seen to be done. Institutional change was something. So institutional change had to come.
You can see the same debates rehearsed on a smaller scale within the BoE itself. Mark Carney’s Mais lecture, at which he launched the reform of the BoE’s structure into a matrix [management], was a case in point. Organisational sub-units, previously lined up behind the Bank’s ‘core purposes’, had neglected ‘synergies’. So these sub-units were shuffled. And into a formulation that looks uncannily like the one BoE old-timers remember that ruled before 1994, when the late Eddie George and Mervyn King tore up a matrix management structure, which they declared had lost focus, and replaced it with one that aligned sub units with core purposes.
[I guess all I am doing is re-capitulating Dilbert, actually. Though now I say that, I cannot lay my hands on the cycles of management structure cartoon that came to mind.]