Bank of England appoints woman as first chief operating officer
Charlotte Hogg will head all the day-to-day management functions of the Bank and become the most senior female employee in its 319-year history. Read more…
George Osborne’s raid on QE proceeds rejected by statistics watchdog
Move to count £35bn from quantitative easing against deficit ‘might have been influenced by presentational considerations’. Read more…
Bond bubble threatens financial system, Bank of England director warns
Andy Haldane fears the bursting of ‘the biggest bond bubble in history’ after electronic money printing exercises by the Bank of England and the Federal Reserve in the US. Read more…
Lending to individuals is on the up, driven by mortgages, BoE figures show, but business lending hits a slump
Lending to individuals rose in April, but figures from the Bank of England showed a sharp fall in the amount of borrowing done by businesses.
Non-financial firms paid off £3bn of loans (including overdrafts) over the month, compared to an average monthly repayment of £1.3bn over the previous six months.
Year-on-year, borrowing contracted by 4%, while among small- and medium-sized enterprises (SMEs) it fell by 3.3%.
While lending to businesses fell, the Bank’s figures showed a pick-up in consumer credit in April, with total lending to individuals increasing by £1.4bn compared to an average monthly increase of £1bn over the previous six months.
This was buoyed by an increase in mortgage lending, which was up £0.9bn during the month. The number of loans approved for house purchase reached a three-month high of 53,710, while remortgage figures reached 30,313 – higher than the previous six-month average.
The figures are the latest to suggest an upturn in the property market following government efforts to boost mortgage availability through its Funding for Lending scheme and, more recently, the launch of the Help to Buy scheme, which offers equity loans to buyers.
On Thursday, Nationwide building society reported a 0.4% rise in house prices in May, and said there were “reasons for optimism” that activity would continue to pick up.
However, while Funding for Lending does seem to have helped the mortgage market, Howard Archer, chief UK economist at IHS Global Insight, said the further drop in net lending to businesses added to the evidence that it has so far failed in its other purpose, to boost loans to companies.
The scheme was extended in April, with an emphasis on SMEs, but Archer said: “How much companies want to borrow going forward remains questionable, but it is important for UK growth hopes that all companies who are in decent shape and who do want to borrow – whether it be to support their operations, lift investment, or explore new markets – can do so, and at a non-punishing interest rate.
“This applies to all companies, whatever their size.”
Separate figures from the Building Societies Association (BSA) showed its members have been increasing their share of the mortgage market over the past year, with lending by mutuals accounting for 26% of gross lending in April, compared with 21% in April 2012.
The BSA said that in the first four months of 2013 mortgage balances at mutuals had increased by £2.8bn, while balances at other lenders had fallen by £3.1bn. Gross mortgage lending was up by 55% year-on-year at £3.2bn, while net mortgage lending increased from £0.2bn in April 2012 to £0.9bn.
However, the figures are skewed by the stamp duty holiday on properties costing up to £250,000 that ended in March 2012 and led to a quiet April in the mortgage market.
Twittersphere speculates on possible choices for outgoing Bank of England governor, with Dire Straits among suggestions
Sir Mervyn King, the outgoing governor of the Bank of England, is to be Kirsty Young’s guest on Desert Island Discs.
King, who is being by replaced the Canadian central bank governor Mark Carney, will be the castaway on Sunday on the popular BBC Radio 4 programme.
The BBC revealed King would be the first Bank of England governor to appear on the programme in listings published on Wednesday, but declined to reveal any of King’s records or his choice of luxury. However, that has not stopped the Twittersphere speculating.
Andrew Sentance, a former member of the Bank’s monetary policy committee (MPC) who is a fan of 1970s rock and a band member himself, suggested Easy Money – stipulating the songs of that name by King Crimson, Rickie Lee Jones, Billy Joel or ELO – while the consumer campaign SaveOurSavers suggested: “Surely ANYTHING by Dire Straits.”
Dire Straits tracks were popular with Twitter users using the hashtag #MervynSongGuesses. Iron Lad suggested Money for Nothing, which he said would be “Very apt song and artist names I think!”.
Several others suggested Edith Piaf’s Non, Je Ne Regrette Rien, and Meat Loaf’s Objects in the Rear View Mirror May Appear Closer than They Are.
The BBC also refused to reveal anything King has said in the pre-recorded interview, but it seems unlikely that he will slip into retirement without, once again, calling for further economic stimulus.
He may also call for an end to “banker bashing”. In a valedictory interview with Sky News this month he called on the public and the media to stop “demonising” bankers.
“Don’t demonise individuals here. This wasn’t a problem of individuals, this was a problem of failure of a system,” he said. “We collectively allowed the banking system to become too big, we gave them far too much status and standing in society and we didn’t regulate it adequately by ensuring it had enough capital.”
He said regulatory reforms to the way the City operates would lead to a “revolution in the way in which banking is handled and we will be able to be proud again of British banking”.
King was brought up in Wolverhampton – and may therefore favour a tune by one of its famous musical sons – Slade perhaps, or Kevin Rowland of Dexy’s Midnight Runners. He read economics at Cambridge University – so may choose a little Radiohead in honour of student bandmember Colin Greenwood – before going on to be an academic at Cambridge, Birmingham, Harvard, Massachusetts Institute of Technology and the London School of Economics.
King, 65, joined the Bank of England as chief economist in 1991 and rose to become governor in 2003.
1797 work includes first use of Bank’s nickname, the old lady of Threadneedle Street, in print
The vicious political cartoon in which the Bank of England’s famous nickname, the old lady of Threadneedle Street, first appeared in print is going on display at the bank for the first time.
The 1797 cartoon, Political Ravishment or The Old Lady of Threadneedle Street in Danger, by James Gillray, shows the old lady in modish Georgian costume made of bank notes, sitting on a double padlocked chest holding the gold reserves. She is fighting off the advances of a spindly, spotty, freckly youth who would have been instantly recognisable to the chortling contemporary audience as the man who became prime minister at the age of 24, William Pitt the Younger. It was drawn at a time when Pitt was struggling to reduce the national debt, and the government had ordered the bank to issue paper bank notes rather than gold.
The nickname is probably older – the street name Threadneedle, one of the cluster that converges on the site of the bank, is at least a century older than the foundation of the bank itself – but the cartoon was so famous it ensured the name stuck forever.
In the print – parodied by generations of later artists in every succeeding financial crisis – Pitt has already got his hand into her pocket and is groping out a fistful of coins, but the redoubtable old lady is yelling her head off, screaming: “What, have I kept my honour untainted so long, to have it broke up by you at last? Oh murder! Rape! Ravishment! Ruin, ruin, ruin!!!”
The cartoon, said to have been drawn by Gillray straight on to the copper printing plate, since no sketch has ever been found, first went on sale in Hannah Humphrey’s print show in St James’s, where passersby would cluster around the windows to view the latest scabrous jokes.
A tourist in London a few years later wrote of the impact when new Gillrays appeared: “The enthusiasm is indescribable when the next drawing appears. It is a veritable madness. You have to make your way through the crowd with your fists.”
It is going on display at the Bank’s museum in an exhibitionof cartoons and caricatures tracing the long history of the institution, including works by George Cruikshank, John Tenniel and the Guardian’s own Steve Bell.
Feminist campaigner accuses Bank of failure to eliminate discrimination under the Equality Act
The Bank of England is facing a threat of court action for failing to adhere to equality laws following its decision to replace the only historical female figure on English banknotes with a man.
Solicitors acting for feminist campaigner Caroline Criado-Perez have written to the Bank accusing it of failing in its duties to eliminate gender discrimination under the Equality Act.
It comes after the Bank of England’s governor, Sir Mervyn King, announced last month that social reformer Elizabeth Fry would be replaced with former prime minister Winston Churchill on the £5 banknote from 2016. “Sir Winston Churchill was a truly great British leader, orator and writer,” he said. “Above that, he remains a hero of the entire free world. His energy, courage, eloquence, wit and public service are an inspiration to us all.”
More than 23,000 signatures have been added to an online petition set up by Criado-Perez, co-founder of thewomensroom.org.uk, calling for the Bank to reverse its decision to remove the only woman, other than the Queen as head of state, to feature on a banknote. She said: “Mervyn King has a huge responsibility when deciding who appears on our notes. He says himself that banknotes acknowledge the life and works of great Britons. An all-male lineup on our banknotes sends out the damaging message that no woman has done anything important enough to appear. It is not acceptable for such an influential institution to overlook women in this way.”
Responding to the petition, the Bank said in a statement: “The Bank has celebrated the lives of eminent British personalities on the back of its notes since 1970. It is usual practice to consider a number of candidates all of whom have been selected because of their indisputable contribution to their particular field of work, recognised with the benefit of lengthy historical perspective, and about whom there exists sufficient material on which to base a banknote design. The final decision is made by the governor but the public are able to suggest names; a list of these is on our website.”
Solicitors Deighton Peirce Glynn, acting on behalf of Criado-Perez, have contacted the Bank claiming it has failed in its duties under the Equality Act. Louise Whitfield, who is representing the campaigner, said: “I am astonished that the Bank of England has been unable to think of any great women to appear on their banknotes, given that there are so many. This is the perfect opportunity for a national institution to promote equality but it has failed to do so.”
The Bank has two weeks to respond.
Monetary policy committee leaves interest rates unchanged at their record low of 0.5% and holds off from implementing a fresh round of QE
Bank of England policymakers have voted against boosting their £375bn quantitative easing programme, amid signs of a nascent economic recovery.
At the close of their monthly two-day policy meeting, the nine members of the monetary policy committee announced that they would leave interest rates unchanged at their record low of 0.5%, and refrain from implementing a fresh round of QE.
For the past three months, three MPC members, including the outgoing governor Sir Mervyn King, have advocated a £25bn extension of QE, but been outvoted by their colleagues, who are concerned that inflation remains well above the government’s 2% target.
Howard Archer, of consultancy IHS Global Insight, said Thursday’s vote may have been even closer.
“The Bank of England’s decision to hold off from quantitative easing was once again likely the result of a tightly split vote. Indeed, it may even have been as close as 5-4,” he said, adding that independent economist Martin Weale may have joined the dovish camp, “given his recent comments on more benign inflation developments resulting from lower oil and commodity prices as well as ongoing low earnings growth”.
However, a no-change decision had been widely expected, after official figures showed that the economy expanded by 0.3% at the start of 2013, avoiding a “triple dip” recession. The latest data from the industrial sector, released on Thursday, showed that output increased by 0.2% in the first quarter.
Policymakers may also be waiting for firm evidence about the impact of the government’s Funding-for-Lending Scheme (FLS), aimed at bringing down borrowing costs, before they take more action.
“With the FLS just extended in April and better-than-expected recent data, the MPC are probably comfortable waiting to see whether the improvement is sustained,” said John Zhu, of HSBC.
King will explain the MPC’s decision-making in more detail when he presents the Bank’s quarterly inflation report, including updated forecasts for growth and inflation over the coming months, next Wednesday.
Next week’s press conference will be the last before King gives way to Mark Carney, the Canadian hand-picked by George Obsorne to take over in Threadneedle Street, at the start of July.
Lee Hopley, chief economist at manufacturers’ group the EEF, said: “Some signs of growth at the start of the year, together with some stabilisation of activity indicators in April will have been regarded as positive. But confidence that the underlying growth situation is improving will be fragile, leaving the possibility of more asset purchases on the table.”
Bank of England will announce interest rate and QE decisions at noon BST, after South Korea slashed borrowing costs overnight
Chancellor tells Sir Mervyn King that financial policy committee must consider impact of its actions over bank capital
George Osborne has warned the Bank of England that it risks derailing Britain’s fragile economy if it uses tough new financial watchdog powers to clamp down too hard on the City.
The chancellor told the Bank’s governor on Tuesday that Threadneedle Street’s new financial policy committee (FPC) should take account of the impact of its actions on “near-term economic recovery” when deciding on the regime under which banks operate.
In a letter to Sir Mervyn King, Osborne said there may be “short-term tradeoffs between the committee’s secondary objective of contributing towards economic growth and its primary objective of addressing sources of systemic risk, which may vary at different points in the economic and credit cycle”.
The letter highlights the Treasury’s concern that the Bank may set such tough capital and liquidity requirements for banks and other financial institutions that the flow of credit to business and households is impaired. After flatlining for two years, figures released last week showed that the UK economy grew by 0.3% in the first three months of 2013. Osborne is keen to ensure there is no relapse in the coming months.
“It is particularly important, at this stage of the cycle, that the (financial policy) committee takes into account, and gives due weight to, the impact of its actions of the near-term economic recovery,” the chancellor said.
Last month, the FPC sowed uncertainty among the main UK banks when it said they needed to raise an additional £25bn in capital to secure themselves against future problems.
The lack of clarity on the amount of capital banks need to hold is one of the issues impeding Lloyds Banking Group’s ability to decide if it can start paying dividends for the first time since the financial crisis began. Such dividends are regarded as crucial if the bank is to be sold to private investors. On Tuesday, Lloyds, of which 39% is owned by the government, reported a sharp rise in profits for the first quarter of 2013, to £2bn, despite its failure to sell 630 branches to the Co-operative Group last week.
George Culmer, the Lloyds finance director, said the bank was awaiting the outcome of discussions with the new Prudential Regulation Authority, spun out of the Financial Services Authority to regulate banks, over the size of any capital shortfall it may have. Culmer said he was unsure when Lloyds would know about its capital position.
Lloyds’s closely watched measure of capital – the core tier-one capital ratio – rose from 12% to 12.5% by the end of the first quarter. “Given our strongly capital generative core business and continued progress in increasing capital and reducing risk through non-core asset disposals, we continue to be confident in our capital position,” the bank said.
The FPC was set up at the Bank of England by the coalition government in response to what was seen as the regulatory failings that led to the crash of 2008. The committee has been operating on an interim basis since 2011 and only formally came into existence on 1 April.
Osborne used his letter to set out the remit for the FPC and to make recommendations about how it should operate.
“The damaging effects of the financial crisis revealed the need for macro-prudential regulation. Even if individual firms are believed to be sound, when their activities are considered in aggregate, risks to the whole system can emerge,” the chancellor said.
He added that under Labour’s tripartite system – in which the Treasury, the Bank and the Financial Services Authority all played a role in policing the City – no one authority had responsibility for addressing systemic risk.
Osborne instructed the Bank to agree and publish “those risks it intends to address as a priority, together with the underlying risk assessment and the time horizon over which it proposes to address them” by the time of its late 2013 financial stability report.