BOE Opens Doors as Crisis-Hit Staff ‘Smell the Roses’

By Jennifer Ryan and Brian Swint

Sept. 9 (Bloomberg) -- The Bank of England is throwing open its doors to the public again in an annual event that was pared back a year ago following the collapse of Lehman Brothers Holdings Inc., a sign the financial crisis has now abated.

The central bank will allow visitors to see parts of its main building including the Court Room, where its governing board meets, as part of the Open House London weekend event on Sept. 19-20, according to the bank’s Web site. Last year the bank limited the tour to its museum as staff worked overtime on the Saturday and Sunday of Sept. 20-21 to save Britain’s financial system.

That was the weekend after Lehman filed for the biggest bankruptcy in history and the U.S. loaned $85 billion to bail out American International Group Inc. Bank of England staff then went to work on a plan to rescue the banking system, which Deputy Governor Paul Tucker said afterward came “preciously close” to collapse.

“People get pulled off teams and put into crisis groups where they’re often not allowed to talk to each other, and that happened when Lehman went under,” said Colin Ellis, who worked at the central bank until October and is now an economist at Daiwa Securities SMBC in London. “All those people who had been running to stand still are now able to go out and smell the roses more.”

Lehman filed for bankruptcy on Sept. 15, 2008, and the Federal Reserve rescued AIG the next day. Meanwhile, U.K. officials struggling to shore up HBOS Plc engineered the bank’s acquisition by rival Lloyds TSB Group Plc. That was announced on Sept. 18, the same day the Bank of England participated in a joint coordinated dollar swap with the Fed.

Economic Recovery

Bank of England Governor Mervyn King said Aug. 12 the U.K. may be heading for a “relatively slow recovery” as it emerges from the worst contraction in a generation, though the world financial system is in “a fragile condition.” To battle the crisis, the bank has cut the key interest rate to 0.5 percent, the lowest since it was founded in 1694, and is printing 175 billion pounds ($290 billion) of money to buy bonds. An official at the bank had no comment on this year’s tour.

Bank officials may have met and worked in rooms visitors would otherwise have seen on the tour of the historic chambers. Its headquarters take up a 3 1/2-acre block in the heart of London’s financial district, designed by Herbert Baker between 1925 and 1939 and incorporating elements of a previous building by Sir John Soane, the bank’s architect from 1788 until 1833.

Weather Vane

In the Court Room, a remnant of the original building close to where the bank’s Monetary Policy Committee meets to set interest rates each month, visitors will be able to see a dial linked to a weather vane and once used to set policy. Changes in wind speed and direction on the River Thames signaled that cargo ships may dock more quickly, and the heavier trading could boost demand for money and credit.

The Lehman collapse provoked a storm in financial markets. Bank officials started work “pretty much straight away” on a rescue plan which led to the government taking stakes in Lloyds Banking Group Plc and Royal Bank of Scotland Group Plc, former Deputy Governor John Gieve told the BBC last month.

“The pace at which things were moving in those two weeks after the Lehman’s bankruptcy is almost impossible to exaggerate,” Adair Turner, chairman of the U.K. Financial Services Authority, told lawmakers in November 2008.

Joint Action

The U.K. rescue plan was announced on Oct. 8, the same day the central bank made a surprise half-point interest rate cut in joint action coordinated with other central banks.

Alan Greenspan, former chairman of the U.S. Federal Reserve and an informal adviser to Prime Minister Gordon Brown, said today Britain will be slow to rebound from the slump after the global recession battered exports.

“It’s going to take a long while for you to work your way through this,” he told the BBC. “Britain is more globally oriented as an economy.”

“The prime minister’s view is that this is not a time for complacency,” Simon Lewis, Brown’s spokesman, told reporters today in London. “The prime minister feels strongly about the need to keep recovery going by maintaining the appropriate level of expenditure.”

The crisis created “exceptional levels of stress” in many parts of the bank, according to its annual report released in May. The Bank of England expanded its bonus pool and took on the most staff in more than two decades as events unfolded. The number of employees rose by about 6 percent and the bonus pot was widened to encompass 8.1 percent of salaries.

“It really struck me just how hard people were working,” said Daiwa’s Ellis. “The bank’s very lucky to have such a dedicated and able staff at its fingertips. Now the projects that had been put on hold can start up again.”

To contact the reporters on this story: Jennifer Ryan in London at Jryan13@bloomberg.net; Brian Swint in London at bswint@bloomberg.net.