Appointment of Professor Randall Kroszner to the Financial Policy Committee

Introduction

1. Professor Randall Kroszner was appointed an external member of the Financial Policy Committee (FPC) by the Chancellor on 21 December 2022 and is due to start the role in February 2023.¹

2. We took evidence from Professor Kroszner on 24 January 2023. He provided a full CV and answered our questionnaire prior to giving oral evidence. We thank him for his evidence.

3. In this Report, we have considered the suitability of Professor Kroszner against two criteria—whether he has the personal independence and appropriate professional competence to undertake the role of an external member of the FPC.

1 The appointment of Professor Kroszner

Background on Professor Kroszner

4. Professor Randall Kroszner has been appointed for a three-year term starting in February 2023.²

5. Professor Kroszner is the Norman R. Bobins Professor of Economics at the University of Chicago’s Booth School of Business, where he was also Deputy Dean, Executive Programs, from 2018 to 2022. Prior to this, Professor Kroszner served as a Governor of the Federal Reserve System from 2006 to 2009, where he chaired the Committee on the Supervision and Regulation of Banking Institutions.³ He was a member of President George W. Bush’s Council of Economic Advisers from 2001 to 2003. Since 2018, Professor Kroszner has served as Chair of the Financial Research Advisory Committee at the US Treasury’s Office of Financial Research, having served as Vice-Chair from 2015 to 2018. He first joined the Booth School of Business in 1990 as an Assistant Professor, having been awarded a PhD from the Department of Economics in Harvard that same year. He has held a number of posts as a visiting Scholar or Professor.

Our evidence

6. In oral evidence, we questioned Professor Kroszner about his personal suitability for the post and the UK’s financial stability. Topics covered during the session included:

• His motivation for taking the position;
• How he was approached for the role;
• His knowledge of the UK economy, and how it differs to the US;
• His other ongoing commitments;
• The time he will spend in the UK;
• Possible conflict of interests in the future;
• His expected physical attendance at FPC meetings;
• His expected travel and subsistence costs;
• Potential financial conflicts;
• Protecting confidential UK information;
• His knowledge of the UK’s current macroprudential position and outlook, and differences to the US;
• How he will keep updated on the UK outlook while in the US;
• The rules around expressing his views;
• His thoughts on regulators’ secondary competitiveness objective;
• His thoughts on current financial stability issues;
• His thoughts on mitigating financial stability risks, such as Liability Driven Investment;
• His thoughts on the effectiveness of the FPC;
• The importance of international cooperation for the FPC;
• The impact of quantitative tightening on financial stability;
• The risks from the non-bank sector, and the impact of regulation of banks on those risks;
• Any concerns he has about the Edinburgh Reforms;
• Whether the lessons from the financial crisis may be forgotten;
• The risks from the national debt on financial stability;
• Academic work on the impact of quantitative tightening;
• How to better identify emerging financial stability risks;
• How to improve transparency in the financial system;
• The cost of living, household and corporate debt and financial stability;
• Any conflict between promoting financial and prudential stability and consumer welfare;
• The financial stability impact of events in China;
• The impact of climate change, and worldwide health crises on financial stability;
• His views on the Government’s decisions on Solvency II;
• His thoughts on the countercyclical capital buffer and its future level;
• His views on the UK’s current position in the macroeconomic cycle;
• The risks of cryptoassets to financial stability;
• The potential of blockchain technology;
• Should the Bank of England issue a Central Bank digital currency;
• Could the digital renminbi rival the dollar;
• The risk to financial stability from cyber-attack and quantum apocalypse.

Conclusion

7. Professor Kroszner has an eminent academic background and extensive international experience. He will bring a valuable trans-Atlantic perspective to the FPC. We note his plans to deepen his knowledge of the UK economy and financial system.

8. We are satisfied that Professor Randall Kroszner has the appropriate professional competence and personal independence to undertake the role of external member of the Financial Policy Committee. We wish him every success.

Formal minutes

Tuesday 24 January 2023

Members present:

Harriett Baldwin, in the Chair

Anthony Browne

Emma Hardy

Andrea Leadsom

Anne Marie Morris

Draft Report (The appointment of Professor Randall Kroszner to the Financial Policy Committee) proposed by the Chair, brought up and read.

Ordered, That the Report be read a second time, paragraph by paragraph.

Paragraphs 1 to 8 read and agreed to.

Resolved, That the Report be the Twelfth Report of the Committee to the House.

Ordered, That the Chair make the Report to the House.

Adjourned until Wednesday 25 January at 9.30 am

Witnesses

The following witness gave evidence. A transcript can be viewed on the inquiry page of the Committee’s website.

Tuesday 24 January 2023

Professor Randall Kroszner, appointee, external member of the Financial Policy Committee.

Published written evidence

The following written evidence was received and can be viewed on the inquiry page of the Committee’s website.

1 Professor Randall Kroszner’s appointment hearing questionnaire (ARK0001)

2 Professor Randall Kroszner’s CV (ARK0002)

3 Letter from Professor Randall Kroszner (ARK0003)

List of Reports from the Committee during the current Parliament

All publications from the Committee are available on the publications page of the Committee’s website.

Session 2022–23

Session 2021–22

Session 2019–21

Footnotes

1 HM Treasury, Randall Kroszner appointed to the Financial Policy Committee, 21 December 2022

2 HM Treasury, Randall Kroszner appointed to the Financial Policy Committee, 21 December 2022

3 HM Treasury, Randall Kroszner appointed to the Financial Policy Committee, 21 December 2022