Saturday 23 May 2015

The cat's out of the bag with the Bank of England's Brexit plan

Secret Bank of England taskforce investigates financial fallout of Brexit
News of undercover project emerges after Bank staff accidentally email details to the Guardian including PR notes on how to deny its existence

A Bank of England taskforce is researching the possible financial shocks of an EU exit

22 May, 2015

Bank of England officials are secretly researching the financial shocks that could hit Britain if there is a vote to leave the European Union in the forthcoming referendum.

The Bank blew its cover on Friday when it accidentally emailed details of the project – including how the bank intended to fend off any inquiries about its work – direct to the Guardian.

According to the confidential email, the press and most staff in Threadneedle Street must be kept in the dark about the work underway, which has been dubbed Project Bookend.

Brexit– what would happen if Britain left the EU?

It spells out that if anyone asks about the project, the taskforce must say the investigation has nothing to do with the referendum, saying only that staff are involved in examining “a broad range of European economic issues” that concern the Bank.

The revelation is likely to embarrass the bank governor, Mark Carney, who has overhauled the central bank’s operations and promised greater transparency over its decision-making.

MPs are now likely to ask whether the Bank intended to inform parliament that a major review of Britain’s prospects outside the EU was being undertaken by the institution that acts as the UK’s main financial regulator. Carney is also likely to come under pressure within the Bank to reveal whether there are other undercover projects underway.

Officials are likely to have kept the project under wraps to avoid entering the highly charged debate around the EU referendum, which has jumped to the top of the political agenda since the Conservatives secured an overall majority. Many business leaders and pro-EU campaigners have warned that “Brexit” would hit British exports and damage the standing of the City of London.

The report could prove incendiary, but without a public notice advertising the Bank’s research project, parliament and the public would be unable to demand its publication.

The email indicates that a small group of senior staff are to examine the effect of a Brexit under the authority of Sir Jon Cunliffe, who as deputy director for financial stability has responsibility for monitoring the risk of another market crash. 
Cunliffe also sits on the board of the City regulator, the Prudential Regulatory Authority.

James Talbot, the head of the monetary assessment and strategy division, is involved in Project Bookend, drawing on his past work as an adviser on European economic policy.

The email, from Cunliffe’s private secretary to four senior executives, was written on 21 May and forwarded by mistake to a Guardian editor by the Bank’s head of press, Jeremy Harrison.

It says: “Jon’s proposal, which he has asked me to highlight to you, is that no email is sent to James’s team or more broadly around the Bank about the project.”

It continues: “James can tell his team that he is working on a short-term project on European economics in International [division] which will last a couple of months. This will be in-depth work on a broad range of European economic issues. Ideally he would then say no more.”

The email states that Talbot planned to inform staff on Thursday.

The message goes on to propose that questions from “other parties (eg: the press) about “whether this was a project to look at the referendum”, should be given the answer “that there is a lot going on in Europe in the next couple of months – pointing to some of the specific European economic issues (eg: Greece) that would be of concern to the Bank”.

Among the senior staff listed on the email and aware of the project are: Iain de Weymarn, Mark Carney’s private secretary since last month; Nicola Anderson, head of risk assessment in the financial stability department; Phil Evans, director of the international division; and Jenny Scott, executive director communications.

A Bank spokesman said: “It is stated government policy that there will be a renegotiation and national referendum on the UK’s membership of the European Union at some point. It should not come as a surprise that there are a range of economic and financial issues that arise in the context of the renegotiation and national referendum. It is one of the Bank’s responsibilities to assess those that relate to its objectives.

It is not sensible to talk about this work publicly, in advance. But as with work done prior to the Scottish referendum, we will disclose the details of such work at the appropriate time. While it is unfortunate that this information has entered the public domain in this way, the Bank will maintain this approach.”

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