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The governor of the Bank of England has warned against the private sector taking overly punitive measures against senior executives in the wake of the resignation of Charlotte Hogg over what he called an “honest mistake”. Ms Hogg was forced to resign from her post as deputy governor of the Bank within weeks of her appointment after it was revealed she had failed to inform the BoE of her brother’s job at Barclays – a lender that she would have responsibility for regulating in her position.
The disclosure of family relationships was required under the BoE’s code of conduct, which Ms Hogg helped to design.
Speaking at the BoE’s conference with the Banking Standards Board today, Mark Carney said Ms Hogg made an “honest” but “serious mistake”. However, he described a “one strike and you are out” policy for such misdemeanors as “disproportionate” if applied across the private sector.
Although Mr Carney said he expected the firms to follow the BoE’s response in launching an investigation and potentially cutting bonuses for individuals, overly harsh punishment could deter firms from attracting the best talent, have employers “running scared” and “drive compliance underground”.
“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 the governor.
The BoE, Prudential Regulatory Authority and the Financial Conduct Authority have been trying to improve behaviour after a string of scandals that have tainted London’s reputation, such as the rigging of foreign exchange and Libor benchmarks.
“We must move from an excessive reliance on punitive, ex post fines of firms to greater emphasis on more compelling ex ante incentives for individuals, and ultimately a more solid grounding in improved firm culture”, added the governor.
Ms Hogg was forced resign less than a month after her appointment after coming under fire from the Treasury Select Committee, which said that the former banker did not have the requisite levels of “competence” to hold one of the most powerful positions at the Bank.
Ms Hogg first joined the BoE as chief operating officer in 2013 and had failed to inform authorities that her sibling Quintin worked in a planning unit at Barclays.
In a hearing at the TSC earlier this month, Ms Hogg mistakenly said she had made the disclosure before issuing an a apology for misleading MPs.
Before her departure, the BoE reassigned her COO responsibilities and Ms Hogg waived an annual increase in her salary, Mr Carney said. Her resignation leaves the BoE with no female deputy governors and after June will mean there is only one woman on its three main policymaking committees.
Image via Bloomberg