Call to privatise the Bank of England
In a week where it has been easy to criticise the Bank of England, the troubled central bank can at least derive some comfort from a report which says it should be privatised and once again be allowed to regulate the UK banking system. In a new research paper – Central banking in a free society, released by the Institute of Economic Affairs – professor Tim Congdon argues that the decision by Gordon Brown back in 1997 when he was UK Chancellor to change the structure of financial regulation in the UK is a fundamental factor in the current banking crisis. Although Brown granted the BoE independence, he also removed its authority on banking supervision and regulation. Congdon argues that the BoE could do its job most effectively if it were privatised.
“The current financial crisis raises fundamental questions about the relationship between the commercial banks and the Bank of England. Before 1997 Britain had a system in which the Bank of England had an understood responsibility to act as lender of last resort to the banks and to help them if they had difficulty funding their assets. That system was a success, which was copied around the world.