The “centralised and hierarchical” structure of the Bank of England is damaging its effectiveness, according to three independent reports.
Its “vulnerable” forecasting processes also lack detail and have become “noticeably worse” since the onset of the financial crisis, the reviews said.
But the central bank was praised for its “effective” actions at the height of the economic collapse.
The three reviews into the Bank’s performance and capabilities were commissioned in May by the Court of the Bank of England, which manages the affairs of the bank but does not deal in monetary policy.
They focused on the Bank’s handling of emergency lending at the height of the financial crisis, its forecasting record and its ongoing plans for providing support to the banking sector.
The reports were completed in October and released yesterday after being discussed at a meeting between BoE officials.
In the first independent review, Ian Plenderleith, chairman of investment company BH Macro and a former Bank of England official, looked at the supply of emergency cash to the banks at the height of the financial crisis in 2008-9.
He concluded that the BoE “achieved its purpose effectively” when it extended billions of pounds in emergency liquidity assistance (ELA) to HBOS and The Royal Bank of Scotland.
He also said the bank did the right thing when it kept the operations secret from the public and much of its governing board until late 2009.
In the report, Mr Plenderleith added that the Bank’s measures were “essential” in providing an element of stability back to the financial markets.
But Bill Winters, who sat on the Independent Commission on Banking, questioned the “robustness” of internal BoE governance.
Calling into question the bank’s “centralised and hierarchical” system, he said that less senior BoE staff had “a tendency to filter recommendations in such a way as to maximise the likelihood that senior staff will find the recommendation palatable”.
He added: “While this makes it easier for the governor, as ultimate decision-maker, to reach conclusions, it risks reducing the range of views he sees and, as such, might lead to a less effective overall outcome.”
The final report, by David Stockton, the former statistics chief at the US Federal Reserve, probed the MPC’s forecasting methods.
He said the events of the last five years has revealed some “vulnerabilities” in the bank’s processes, adding they are not as accurate as those made by some external forecasters.
He also concluded the MPC’s forecasting performance had become “noticeably worse” since the onset of the financial crisis.
Governor Sir Mervyn King and deputies Charlie Bean and Paul Tucker said: “We are starting programmes of work to evaluate the recommendations and to plan changes.”