The Bank of England and the U.K. Treasury must coordinate efforts to address a "crisis" of legitimacy and accountability at the central bank, according to a report published by think tank Positive Money.
"The financial crisis revealed a substantial gap between reality and the orthodox economic theory of central bank independence," the report said. This weakened public trust in central banks and revealed serious problems for accountability and democratic legitimacy.
"Governments must act to free central banks from the illegitimacy trap," the think tank urged while outlining a number of recommendations.
The recommendations focused primarily on reforming the relationship between the Bank of England and the Treasury, improving "the links between them, and updating the protocols that govern their shared responsibility for the economy." In particular, the Treasury should carry out an independent review into monetary policy strategies following a crisis to provide economic lessons as well as greater accountability.
The think tank also suggested that the Treasury reform the appointment process for governor of the BoE and members of its monetary policy committee, mainly by providing more clarity on the list of candidates and altering job descriptions to diversify potential applicants.
To improve accountability, the Treasury should also allow independent academics and civil society representatives to weigh in on reviews of the central bank's policy decisions, Positive Money said. The think tank also suggested that the Treasury and the Department for Business, Energy and Industrial Strategy create a joint commission to develop a credit policy framework for the U.K., with external representatives comprising a majority of the proposed panel.