March 14, 2017 / 1:18 PM / 6 months ago

Hogg exit only half solves Bank of England problem

People pass the Bank of England in the City of London January 16, 2014. REUTERS/Luke MacGregor

LONDON (Reuters Breakingviews) - Charlotte Hogg has done the right thing by stepping down from the Bank of England. The UK central bank said on Tuesday that its newly-appointed deputy governor had resigned after a UK parliamentary committee criticised her for failing to disclose a conflict of interest. Her departure mitigates the damage to the bank’s reputation, but an underlying problem lingers.

Hogg failed to disclose for almost four years that her brother worked in a strategic capacity at Barclays even though her role as chief operating officer meant she was a senior member of staff. That was at odds with the bank’s own code of conduct, which requires personal connections to be disclosed. While Hogg volunteered the information during the vetting process for the deputy governorship, this was ultimately beside the point. The previous lack of disclosure looked bad. One of lawmakers’ biggest concerns was that in a letter apologising to them for her oversight, Hogg wrongly concluded that conflicts would not arise in the future.

Had Hogg not quit, the central bank could less legitimately demand tough standards from the banks it regulates. Even so, it still has a problem. The mistake only became apparent because of parliamentary scrutiny. And when it did, Hogg received no more than a verbal warning. The bank would look tougher if she had resigned more swiftly.

More importantly, the chair and deputy chair of the bank’s Court of Directors, Anthony Habgood and Bradley Fried, left something to be desired when appearing in front of the same committee of lawmakers on March 7. Fried said merely that her oversight warranted grumpiness, despite conceding that the code had been broken. That gave the impression the pair were more focused on ensuring Hogg stayed than the risks to the bank’s reputation.

During Mark Carney’s tenure as governor, the central bank has sought to become more professional – a process that Hogg herself helped advance. But it still has some way to go, judging by Habgood’s comment on Tuesday that Hogg’s resignation “exceeds the standard that would be expected in the private sector”. The UK central bank is an important guarantor of UK institutional credibility and should live up to higher standards as a matter of course. It cannot afford to have a tin ear.

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