The governor of the Bank of England has defended his handling of the controversy surrounding his deputy Charlotte Hogg and said she shouldn’t have had to resign for an honest mistake in failing to disclose that her brother worked at Barclays.
In a speech at Threadneedle Street, Mark Carney said he had spoken to the top bosses of the major banks last week to tell them they should not feel under pressure to fire staff for making similar errors.
Hogg, his number two, quit last week in the face of a damning report by the Treasury select committee into her failure to disclose that her brother worked at Barclays, which is regulated by the Bank of England. Hogg, promoted from chief operating officer only on 1 March, had told MPs that she had disclosed Quintin Hogg’s role in line with the code of conduct she had herself drawn up. She later conceded she had not made the disclosure.
Carney said the Bank’s response had been tougher than would have been expected from the banks it regulates.
Her salary rise had been blocked, she had been reprimanded and her assignments as chief operating officer – a role she still holds – had been reassigned.
“For those who have questioned whether we get it, we do. We know this honest mistake was also a serious mistake, one that was compounded by the fact that Charlotte Hogg had overseen the development of our new code. We were clear upfront that there must be consequences for both her and the Bank,” Carney told an audience assembled to discuss ethics in banks.
“She was formally warned in the strongest, and most public, of terms. There were consequences for her compensation. While she couldn’t forfeit a bonus, as Bank of England governors cannot receive one, she waived her salary increase this year,” said Carney.
He said the verdict of the MPs, who concluded her “professional competence falls short of the very high standards” required, had “triggered Charlotte Hogg’s decision to resign”.
He said he wanted “to dispel the urban myth that has developed around these events”.
“We do not run for our regulated entities a disproportionate ‘one strike and you’re out’ regime for an honest mistake. Neither explicitly nor implicitly,” said Carney.
“Proportionate means taking into account the severity of the incident, the track record of the individual and their firm, as well as the firm’s wider response. An honest mistake that is freely admitted for which a firm takes prompt remedial action is not a firing offence,” said Carney.
“And here’s my point: we must not let recent events inadvertently tighten perceived standards for the industry because that could have senior managers running scared, drive compliance underground and undermine our collective objectives,” said Carney.
“Another risk, flagged by some, is that it will also become harder to find candidates of sufficient calibre willing to take on senior roles. This is why last week I spoke with the CEOs or chairs of all of the major banks to reiterate our expectations as regulator. I’m glad I did because they were all concerned about precisely such unintended consequences,” he said.
The body that oversees the Bank of England, known as the court, is conducting a review to learn the lesson. “Its results will be made public. In other words, consistent with our higher standards, the Bank planned a tougher response than we would expect in the private sector, but one that, in our judgment, was still proportionate to an honest mistake that was freely and transparently admitted,” said Carney.
