Archive for April 11th, 2019

Promoting diversity at central banks…

April 11, 2019

Bank of England is taking diversity very seriously. The are trying to increase representation of Black, Asian and Minority Ethnic (BAME) member in the central bank.

Mark Carney, the Governor discusses the issues:

It’s a pleasure for the Bank of England to host this workshop on Investing in Ethnicity & Race.  To pursue its mission, Bank of England must reflect the diversity of the people it serves. 

That hasn’t always been the case. Historically, central banks were run by the City for the City. The Bank’s first female Court member, Frances Heaton, was appointed only in 1993, while our first Black, Asian and Minority Ethnic (BAME) member, Lord Morris, followed five years later. I’m the 120th in a very long line of male, white Governors of the Bank.

Over the last five years the Bank has implemented a concerted strategy to increase diversity and foster inclusion. These initiatives have had a material impact on all aspects of diversity at the Bank. We are now reinforcing them to further improve the retention and progression of BAME colleagues in particular, and to
deepen progress on inclusion more generally.

The Bank values diversity for at least three reasons.

  • First, it is the right thing to do: a public institution should reflect the public it serves.
  • Second, diversity helps to build the trust we need to fulfil our remits.
  • Third, greater diversity leads to better decision making


Indian Fiscal Federalism: A Few Empirical Questions (Review of Dr YV Reddy’s book)…

April 11, 2019

Prof Lekha Chakrabarty reviews Dr Reddy’s new book on Indian fiscal federalism.

The book titled “Indian Fiscal Federalism” co-authored by Y V Reddy and G R Reddy is written from a “practioner’s perspective”. The simplicity of this book is appealing, especially when the content of the book is about a very complex set of rules and games between the Centre and the States. I have identified a few “empirical questions” in the book. Let me confine my discussion to these empirical aspects.
One aspect that received less adequate recognition in the context of “what holds India together” is the role of Finance Commissions1. The book rightly highlights the significance of the existing institutional mechanisms for providing “predictability in the federal fiscal relations” along with the smooth transition of political regimes through peaceful elections, State Re-organization mechanisms and the other institutions of economic management.  The book throws light into these aspects of “asymmetric” and “co-operative” federalism in India.  There was “continuity”. There was “change”. The effectiveness of such processes in creating “convergence” is an empirical question. Such empirical questions have gained significance globally.
In Brooking Papers (2017)2 there was a similar analysis of “economic convergence” about whether “Europe as a political project too ambitious?” They have found that there is a great extent of “economic convergence” within the European Union, despite widening cultural and institutional heterogeneities within an “economically integrated” Europe. However, the “cultural divergence” – “nationalism” – is the stumbling block. Such issues have started appearing even in the well-functioning federations like the US, with “protectionist” policies.

UK Labour Party considering house price target for Bank of England

April 11, 2019

Howard Davies in a speech on the 20th anniversary of the Financial Stability Institute (conference here) said the following:

The Financial Stability industry has expanded greatly in the last decade. As well as the Institute there is of course a Board. The IMF publishes a six-monthly Global Financial Stability Report. Every self respecting central bank publishes one, and some regulators do too.

I have never sought to claim personal responsibility for this industry, but perhaps I can immodestly mention my part in it today. I am as certain as I can be that the first Financial Stability Review to be published was the one I launched at the Bank of England in 1996 (ref 1). (Slide 2). In a review of FSRs Martin Cihak et al (ref 2) credit it as the first edition. The first editorial was signed ‘Prudence’, which was an in-joke: Prudence was the name of my wife. Indeed it still is.

The Bank’s FSR was both successful and unsuccessful. It has inspired a huge number of followers, over 50 of them by 2012 according to Cihak. But at the time our objective was to show that the Bank was concerned about financial risks. In 1996 we knew there was a chance that an incoming Labour government would strip the Bank of responsibility for banking supervision. It had not covered itself with glory in the Baring’s debacle. So we thought it a smart  move to publish a new report, in partnership with the Securities and Investment Board, then the UK’s principal securities regulator, to show that we could do joined up analysis of markets. In that sense it was a failure. The Labour government did move supervision out of the Bank in 1997. Of course it has since returned there, but  that is another story.

So essentially, the Bank of England started Fin Stability Report to try and persuade the new incoming Labour Government to keep banking supervision with the central bank. But the government still took it away to FSA only for the powers to come back to Bank of England after the 2008 crisis.

Having said that, Labour Party did reform the central bank and gave it inflation target.

Once again, UK’s Labour party is thinking of trying to give a new target to the central bank:


“What is the future of cash in the UK? Less cash but not cashless

April 11, 2019

Sarah John, Chief Cashier of Bank of England (one who signs the banknotes) in this speech looks at this question most central bankers are asking: What is the future of cash?


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