In the period covered by these minutes the Bank have admitted that a number of members had standing conflicts of interest, and there was no provision for a non-executive chairman.
In a statement, the Bank said:
"At the time, [we] had no powers to take actions to manage macro-prudential risks. It was not responsible for banking supervision and there was no bank resolution authority The roles, in a crisis, of the Bank, the Treasury and the FSA were ill-defined. These deficiencies were rapidly identified during the period covered by the minutes, and were addressed both by the 2009 Banking Act and subsequently by the 2012 Financial Services Act, which radically changed both the role of the Bank and the structure of its governance.
Andrew Tyrie MP, Chairman of the Treasury Committee, commented on the Bank's reaction to the collapse of Northern Rock, stating:
"The Governor’s expression of his view that the risk of moral hazard should be paramount was accepted and applauded, with only a single query about the alternative risk of severe damage to the financial system. Little or nothing appears to have been done to ensure that the risks associated with the emphasis on moral hazard had been thoroughly examined and understood by the Bank.
“The Court was almost entirely reactive: there is hardly any sign of its non-executives coming forward with suggestions or constructive challenges to the assumptions of the executive."
He also raised concerns surrounding a possible leak that allowed the the BBC to report on 13 September 2007 that Northern Rock had applied for emergency liquidity assistance, saying that "the Court could not be certain at the time that it had not come from within the Bank. But it took no action."
Tyrie stated that there were instances of "back-covering" within the Bank upon realisation that the Treasury Committee could request a paper on the Court’s role in relation to financial stability.
He explained:
“Understandable though these instances of back-covering may have been, the non-executive directors appear to have done little thinking of their own about financial stability and to have added little or no substantive value to the Bank’s work on it. They may have achieved the opposite: before the crisis, they reinforced the Bank’s mistaken decision to downgrade financial stability; during the crisis they consumed the Bank’s time with their demands for more information in an attempt to cover themselves.
"Taken as a whole, these minutes make the clearest possible case for radical reform of the Bank’s governance and the need to address the manifest inadequacies of the archaic approach upon which the Bank were relying during the crisis."
Governor, Mark Carney said:
“The financial crisis was a turning point in the Bank’s history. The minutes provide further insight into the Bank’s actions during this exceptional period – the policies implemented to mitigate the crisis, the lessons that were learned, and how the Bank changed as a result.
The Bank is committed to increased openness and transparency and these minutes, in combination with the other recent reviews, provide a complete record of the Bank’s activities during the crisis.”
Chairman of Court, Anthony Habgood said:
“These minutes highlight the importance of the role of Court in ensuring the Bank is robustly governed. While successive reforms in recent years have significantly enhanced Court’s capability to hold the Bank’s executive management to account, there is scope to go further, with a simpler structure and a clearer commitment to accountability. As Chairman of the Bank’s Board, I will do my utmost to ensure that the Bank is open, accountable, trusted and above all, well-governed.”
