The Bank of England is the UK’s central bank, and it’s role is to lend to other banks, regulate the issue of banknotes, oversee payment systems and keep the cost of living stable through its interest rates. At the head of the Bank and its operations is the Governor, who heads the top-level executive team and oversees the fulfilment of the Bank’s mission. The current Governor is Andrew Bailey, appointed under Sajid Javid’s term as Chancellor of the Exchequer, taking over from Mark Carney in March 2020. Having previously served as Chief Cashier (whose signature appears on banknotes) and Deputy Governor at the Bank, as well as well as Chief Executive of the Financial Conduct Authority, the world of finance is no stranger to Mr Bailey and his combined total of 36 years of work at the Bank, but did you know he actually has a PhD in History?
Born 30th March 1959 in Leicester, Bailey attended a local grammar school and eventually went on to study History at Queen’s College, Cambridge. He carried on his studies to achieve a PhD there in economic history, with his thesis focusing on the Industrial Revolution. From there, he spent a year as a research officer for London School of Economics before first entering the Bank of England in 1985, aged 26. It was here he would go on to spend the rest of his career to date, in roles from managing the Policy, Risk and Special Operations group (pertinent to his later work during the financial crash in 2007) to being part of the International Capital Markets Team.
In 1997, during Bailey’s 3-year stint as Private Secretary to the Governor (Eddie George at that time), Chancellor Gordon Brown gave the Bank of England the increased power to set monetary policy, specifically the freedom to set interest rates, which remains one of the most significant reforms in the Bank’s 300-year history. Monetary policy is the control of how much money is in the economy at any given time, usually done through interest rates. Recently, the Bank of England has been using lower interest rates to stimulate the economy after the recession caused by the pandemic, so this power remains highly relevant, and at the time was critical to controlling inflation caused by surging house prices, consumer spending, and the growth rate of the money supply.
The financial crash in 2007 occurred while Bailey was Chief Cashier, and arguably his extensive work on bank recovery and resolution (e.g. the state bailout of RBS and Lloyds Bank, and later as Head of the Special Resolution Unit) is why financial stability seems to be his priority for the Bank nowadays, as he saw for himself the cost of bailouts due to irresponsible banking behaviour. He has since then advocated for the reduction of moral hazard in banking (i.e. where there is incentive to take risks with people’s money because of the availability of state bailouts) and introduced the Senior Managers Regime to enhance accountability of senior staff in the banking sector nationwide.
It seems his work will continue in this trajectory as the economy moves forward from the pandemic and Brexit, and his apparent pragmatism and understanding of economic history will no doubt move the Bank away from unreserved bailouts and risk-taking. The 121st Governor certainly has no shortage of economic uncertainty to steer through, so it’s worth keeping an eye on the news to see his response to our contemporary economic conundra.