Central Bank Reform and the Politics of Blame Avoidance in the UK

Following the financial crisis, the UK central bank gained important new prudential powers for upholding financial stability. Yet the reforms diverged significantly from the government’s original plans and arguably produced a suboptimal institutional design. Drawing on theories of blame avoidance, we argue that the changes were motivated primarily by the need to manage reputational risk. Prior to the 2010 election, the two main parties tried to deflect blame for the crisis by putting forward competing proposals for agency reconfiguration. In response, the Bank of England pursued a strategy of agency subversion aimed at reshaping the reforms to minimise future reputational damage. This involved pushing for ‘hard’ delegation to maximise control of new macroprudential powers, while using ‘fuzzy’ delegation to shift microprudential supervision down to subordinate agencies. The article sheds new light on the drivers of post-crisis reform and the importance and limits of delegation as a strategy of blame avoidance.