Andy Haldane said that greater openness and transparency was not always positive. ‘Sometimes you have to be a bit selective’ © Bloomberg
The Bank of England was not “fully open and fully transparent” during the 2008 financial crisis, Andy Haldane, the chief economist of the Bank of England, said on Friday as part of a debate about the public’s trust in institutions.
Mr Haldane said that greater openness and transparency were not always positive, and that if the central bank had been fully transparent during the crisis the situation would have been “a lot worse”.
He said it would have been the equivalent of “shouting fire in a crowded theatre” and it would have caused an “even greater haemorrhaging of confidence” and greater collateral damage for savers and borrowers from the fallout of the crisis.
“Sometimes you have to be a bit selective, you have to be a bit secretive,” he said. Mr Haldane was working in the BoE’s financial stability department in 2008 and became the central bank’s executive director of financial stability the following year.
But he added that the central bank used to make too much out of the need to keep a degree of mystique around it and now has to face the regular scrutiny of the public and parliament.
“Every time I appear before parliament I tell my wife and children today might be the day,” he said. “By close of business I may have more time on my hands.”
The comments came at an event organised by the Royal Society of the Arts called “The Great Trust Shift”, in conversation with Rachel Botsman, an author and academic who studies trust.
The economics profession is facing a crisis of legitimacy after failing to anticipate the financial crisis and after its warnings of the economic impact of Brexit were ignored by the British public ahead of last year’s vote.
Mr Haldane said there was a chance that the trust deficit in the financial system may never naturally heal following the 2008 crisis.
“A good starting point,” he said, “would be for those of us with an interest in money and finance doing a somewhat better job of explaining why it matters and how it can help and who it is there to serve.” He said the financial services industry has historically done a poor job of doing so.
He said the Bank of England could improve its communications and simplify the language it used as well as being “as humble as humble can be” about its ability to predict the future.
Mr Haldane is currently touring the UK in a series of town hall meetings aimed at improving communication between the Bank of England and the public — so far he has visited Cardiff and Leicester.
Earlier this year he referred to the financial crisis as a “Michael Fish moment” for the economics profession, in reference to a weather forecaster who told the public that no hurricane was coming before one devastated the south of England.
But on Friday Mr Haldane said that the point of referencing Michael Fish had been that it was a moment that weather forecasters learned from and massively improved the accuracy of their forecasts. And that economists could equally learn from their mistakes.
“That was a bad news story with a very happy ending,” he said. “There’s a lesson there for we, as economists, as well that investment, doing your homework, doing it with humility can pay dividends over the long term.”