New outfit for the Old Lady
The last 20 years of independence is a bagatelle in the life of the Bank of england, which dates back to 1694.
What we do know is that the record of controlling inflation and setting interest rates has been infinitely calmer than before.
At a ceremony yesterday to mark those two decades, both former bank insider Theresa May and governor Mark Carney chose to make broader political points.
May used it as an opportunity to talk up free markets in the wake of Labour’s public ownership love-fest in Brighton.
Carney made it plain that although the Bank has been able to use monetary policy to smooth the impact of Brexit, it doesn’t have the capacity to deliver prosperity.
Bank independence did remove the central bank from politics, but it weakened its relationship with the City. This may have been inevitable, given London’s reawakening as a financial centre in which most traditional houses were absorbed by overseas financial groups.
The Old Lady’s divorce from banking was speeded up by Gordon Brown’s decision in 1997 to move banking supervision to the new Financial Services Authority.
The split responsibility proved disastrous. Alex Brummer It robbed the Bank of the raw market intelligence that comes with day-to-day contact and it handed policing to a new institution that wasn’t up to the job.
Northern Rock – the first domino to fall in the financial crisis – was lending 125pc mortgages and employed a casino banking financing model. Yet no one at the Bank or the FSA blew the whistle.
Arguably, 20 years of independence at the Bank solved the problem of rampant inflation. But it created dangers, with banks able to throw away the rulebook and run on minimal capital while creating risky financial instruments.
The result was a devastating financial crisis which is still not over. Some 70pc of Royal Bank of Scotland is still owned by the taxpayer and the financial system has been kept afloat by £435bn of quantitative easing. That has seen a shift of wealth from nonhomeowners and pensions savers to other sections of society.
If banking regulation had remained in Threadneedle Street, the past decade might not have been so horrendous.
This week we reported that some of the pink-coated waiters who guard the Bank have been displaced by security staff in high-vis jackets in recognition of tense times. Modernisation is creeping in behind the stone curtain walls designed by architect Sir John Soane.
The Bank is a glorious building filled with antiques, Persian carpets and evocative prints and paintings, and should really be a museum of the City of London. A modern, more transparent Bank might be better housed in similar glass and steel towers to the global financial giants in the City.
Time to wave goodbye to pink coats, raised eyebrows and the panoply of the past.
Lloyd’s typhoon
FIRST-half profits of £1.22bn from another pillar of the City, Lloyd’s of London, will be a chimera given recent natural disasters.
estimates of the payouts from hurricanes harvey and Irma, earthquakes in Mexico and floods in Asia are in the order of £3.3bn. So the second half will likely be a mess, leading to the worst year since 2012.
The silver lining for catastrophe syndicates is that 2017 could mark the end of a cycle in which insurance premium rates have declined.
Sports rights
DID Premier League rights reach a peak in 2015 when Sky and BT splashed out £5.14bn? Indications are that the advent of streaming means sports rights are becoming a diminishing asset.
It is possible to watch a full Premier League schedule free, courtesy of illegal streaming from North America.
Last night, Amazon entered the fray by streaming the first of ten NFL games across the US, breaking the stranglehold of the traditional networks. Rupert Murdoch’s Fox Sports has begun streaming Champions League games via Facebook.
The days when Sky could use sport as a battering ram to gain satellite customers or BT could use football as a means of attracting more broadband customers could be over.
BT’s customers might well prefer ultrafast fibre to the inflexible incentive of bought rights. Viewers could make their own streaming choices, watch on their mobile phones and not be limited by preordained packages.