Q11 Jesse Norman: To be clear, Mr Winters, you have described the Bank’s decision-making and management as involving filtering and pre-selection of views, lack of diversity, centralisation and hierarchy, or rather stifling centralisation and hierarchy. Court you have said has had little challenge and low skills and is not yet fit-for-purpose because it is en route to being fit-for-purpose. Is that right? I am just summarising what you have said.
Bill Winters: The most important thing is that the purpose that we are measuring against fitness is evolving and it is evolving in not small ways. There are major, major changes that the Bank is expected to undergo. It is in progress. The PRA is not yet formally part of the Bank of England but it is operating, at least in part, as if it were. The Court is evolving in much the same way as the nature of the Bank itself is evolving.
Jesse Norman: Do you think that might be another one of your overly polite moments?
Bill Winters: No. I am perfectly happy to be critical.
Jesse Norman: You have said all those things in your descriptions earlier. You do not dispute that?
Bill Winters: Certainly elements of all those things. Yes.
Q12 Jesse Norman: Okay. Thanks. What are the three changes to management that you would make if you were the Governor of the Bank of England?
Bill Winters: Changes in management process?
Jesse Norman: Yes.
Bill Winters: I would regularly hold meetings in small groups or with individuals that are two or three levels below the Deputy Governor to hear directly how people feel about their experience in the Bank, their working environment, the degree to which their views are valued and accepted, the degree to which they feel able to be open, and also to form some views on who the next generation of leaders are. I do not know that that has not happened in the Bank, but I certainly would suggest it could happen more. That is the human touch. The human touch is critical in complicated organisations.
The second is a less human approach but, nevertheless, trying to get at the same questions, which is surveys. Surveys are always derided in organisations—they were in mine—but nevertheless serve a useful purpose in terms of giving people an opportunity to anonymously or candidly share views in an aggregated way. That would be the second thing.
The third would be to make examples. Where there are examples of good management practice and two candidates for a particular position are otherwise tied in every regard, you give the edge to the person that has demonstrated good management skills. The more effective examples go the other way, where you penalise someone for demonstrating poor management skills. We have all been in situations where you have had outstanding technicians in an area, the best in the world at what they do, but could not manage their way out of a paper bag. Those people should be fired or put into jobs where their lack of managerial skills are less harmful. Those are the three things I would do.
Q13 Jesse Norman: That is very helpful. Are you a fan of 360-degree appraisals?
Bill Winters: I am. I find them occasionally bureaucratic and diluted through overuse but, certainly at the outset in terms of making a bit of a shock adjustment to culture, I find it very useful.
Jesse Norman: That would be quite helpful, presumably, for parts of or all of the Bank?
Bill Winters: Yes.
Q14 Jesse Norman: Thank you. How important do you think very good management skills should be in choosing the next Governor?
Bill Winters: I think very important.
Jesse Norman: Very important?
Bill Winters: Yes.
Q15 Jesse Norman: That is very helpful. When you prepared this very interesting report how far did you consult outside the Bank?
Bill Winters: Reasonably broadly. We spoke to the senior management and/or treasury operators of all the banks, so the users of bank facilities. We spoke to a number of—
Jesse Norman: This is all the big clearers?
Bill Winters: Sorry?
Jesse Norman: All the big clearing banks?
Bill Winters: The big clearing banks as well as some foreign banks. We did a compare and contrast of the Bank of England approach, in particular to the Fed, the ECB and the Bank of Japan, just as other developed country Central Banks who face similar challenges. No direct comparisons, but much of the information in the review that I wrote was informed by either mistakes that these other banks had made or successes that they had had. We spoke to a couple of foreign banks, in particular two banks in the US, in the context of the Fed not in the context of the Bank of England. We spoke to a number of academics, current and existing external members of the FPC and the MPC, and I think that is it.
Q16 Jesse Norman: What was the general view from those contacts about how the Bank ran its liquidity operations now and before the process?
Bill Winters: I think there was a general consensus that the toolkit the Bank
had developed prior to the crisis was not fit-for-purpose. That became clear.
It was well-articulated in this Committee’s report on The Run on the Rock.
It was generally accepted that the Bank has made tremendous strides since The Run on the Rock to bolster its facilities, put up a pretty complete arsenal
and to demonstrate ongoing flexibility. I should say I also discussed with
members of the Treasury and the FSA. I received mixed views from the external
parties on the degree to which the Bank was leading that change versus being
led by some combination of public opinion, Treasury or this Committee. I would
say probably an evenly mixed sense of what was driving that change, but no one
suggested that there was not substantial change. Then there was a long list of
impressions that I have summarised in my review around the things that are
discouraging banks from accessing, in particular, the discount window facility.
Jesse Norman: So stigma?
Bill Winters: The stigma issues.
Q17 Jesse Norman: That is very helpful. We are going to come on to that. Final question. From what you have seen, would it have been better for the Bank to have done a more comprehensive review of this issue earlier?
Bill Winters: This Committee’s review of The Run on the Rock was very substantial and was the right place to start and it was timely. January 2008 was close enough to the original crisis to have been very relevant and I am sure that it guided and shaped the subsequent evolution that took place.
The review that I was asked to do in many ways was just a tune-up or a catch-up on that original report, which I think is a perfectly appropriate thing for the Bank to want to do. Of course, I am well aware of the debate that has been had publicly, and no doubt privately, around whether a broader review should have been done. It is not the review that I was asked to do.
Q18 Jesse Norman: No, absolutely not, but from what you have seen would there have been a case for doing a broader review earlier?
Bill Winters: I think there are lots of interesting questions to be answered around how the tripartite agreement worked or did not work, at least from my perspective, but with a view to understanding how to avoid these things in what is no longer a tripartite system, but a more complicated arrangement with more consolidation of responsibility, but also more actors on the stage and more different constituencies. I refer in the review to the interaction between the MPC, the FPC and the PRA board as three bodies that have external representation. That is extremely complicated. It is not straightforward. Lessons that can be learned about the dysfunctionality of the tripartite arrangement, as it relates to what could become dysfunctionality between those three bodies, would be an important scenario to consider.
Jesse Norman: A further element?
Bill Winters: Yes.
Jesse Norman: That is very helpful. Thank you so much.