Montagu Norman and the transformation of the Bank

Chris Swinson

This post contributes to our occasional series of guest posts by external researchers who have used the Bank of England’s archives for their work on subjects outside traditional central banking topics.

In 1944, the Bank of England’s historian, John Clapham, looked back at the ways in which the Bank had changed since 1914 and remarked:

‘ . . . it would not be fantastic to argue that the Bank in 1944 was further . . . from 1914 than 1914 was from 1714.’

He meant not only that the economic environment had changed beyond imagination, but that the Bank had been transformed. By 1944, the proud institution, which in 1914 had been run by a board with little central banking experience, had espoused professionalism. Remarkably, this transformation was accomplished internally without major disruption. This post suggests how this was done, analysing the important role played by the then Governor of the day, Montagu Norman.

1918 — 1925

Cultural change on a large scale is never easy: especially in an institution whose governance privileged inertia over reform. Information obtained from the Bank of England Archive (BOEA) and the National Archives (TNA) reveals how Norman circumvented potential opposition in order to reshape management of the Bank.

After hostilities ended in 1918, the government decided to aim at restoration of the gold standard, believing that there was no body of opinion in the country which did not desire this result (TNA: T171/246). Whitehall, recognised this would be challenging and attempted to prolong war-time regulations that had permitted some control of financial markets (TNA: T1/12200/37071). When that failed controls were rapidly removed making it harder for the Bank of England to move markets toward restoration. The Bank’s problem was made even more difficult by its own lack of resource. As Lord Robbins later recalled, the Bank was run by part-timers unfitted to deal with the problems that had to be overcome.

Initially, Norman made no attempt to reform either the Bank’s constitution or its structure. Although he must have realised that his plans would take years to come to fruition, he simply accepted that his term of office would have to be renewed regularly, rather than seeking to change the Bank’s rules on the Governorship. The hoops through which he was then obliged to jump to secure re-appointment can be traced in the minutes of the Court and the Committee of Treasury. (BOEA: G4/143 et seq and G8/54 et seq). Lacking the statutory authority to monitor the health of the City’s markets, he instituted regular meetings with the chairmen of City institutions and houses so that, by relying on personal relationships, any lack in authority could be made good. To replace the control over loan issues which had operated in time of war he persuaded the principal brokers to manage the flow of new loan issues. The meetings and the business transacted can be tracked in Norman’s diaries (BOEA: ADM34/1 et seq).

His network of relationships within the City was supplemented by close relationships with key politicians: especially Baldwin, Snowden and Austen Chamberlain. Norman relied on personal influence: eschewing institutional reform and high-sounding statements of his vision, both of which would have offered opportunities for obstruction to those who wished to oppose him.

Internationally, Norman pursued his goals by means of personal diplomacy, travelling constantly to offer the Bank’s support for reconstructing central banks throughout Europe and for mitigating the financial consequences of the Treaty of Versailles. His diplomacy was supported by forming personal relationships with bankers such as Benjamin Strong of the Federal Reserve Bank of New York. The results of his efforts can be tracked in his voluminous correspondence. (BOEA: e.g. G35/7).

Pursuing objectives by such personal means carried the risk that Norman would become isolated and vulnerable: just as a former Governor, Lord Cunliffe, had become isolated in 1917 and was forced to resign. Norman guarded against this risk by careful briefing of the Committee of Treasury, ensuring that the content of these briefings was noted in the minutes (a change in approach that can be tracked in the minute books) (BOEA: G8/54 et seq).

1925 — 1931 — 1944

By 1925, when the Gold Standard was restored in Britain, the limitations of Norman’s approach were becoming evident. Sustaining the breadth of his activities was becoming burdensome not least because of the time occupied by travelling. Helpfully, restoration of the Gold Standard secured support which he used in strengthening the Bank’s staff. In 1926, the Court approved the recruitment of Harry Siepmann, to serve as the first Adviser to the Governors (BOEA).

Organisationally, a central reference library was created, and then a statistical section which enabled the Bank to match capabilities being developed by other institutions.

Internationally, Norman’s initiatives led to the creation of the Bank for International Settlement (BIS) to provide the means by which reparation payments could be managed but served as a forum in which central bankers met to discuss their shared problems. Sir Otto Niemeyer was recruited from the Treasury to serve as a director of BIS having served as a Treasury representative on the Financial Committee of the League of Nations.

When the Gold Standard was abandoned in 1931, yet another department was created to manage the new Exchange Equalisation Account on behalf of the Treasury. This department was augmented by the recruitment of George Bolton, a foreign exchange trader from Helbert Wagg.

In parallel, central banks were created in each major jurisdiction within the Empire, following the precedent of the Bank of South Africa in the early 1920s. In the 1930s, as Norman’s diary could not accommodate the necessary travelling, the project was accomplished by using Advisers and others as surrogates.

It became clear that the Court of Directors could no longer oversee the breadth of the Bank’s operations and that the time was ripe to confront the structural issues which Norman had long worked around. A review of the Bank’s governance chaired by Sir Edward Peacock led to formal abandonment of the rotation of the chairs, broadening of the backgrounds of new directors and creation of Executive Directors. Abandoning the rotation of chairs liberated the appointment of Governors: henceforth capability was more important than who was next in line. (BOEA: G15/202-5).

Norman’s strengths and weaknesses

Broadening the Bank’s activities and revitalising its capabilities spoke to Norman’s strengths. His self-discipline and courtesy in dealing with even the most tedious aspects of administration suffused the organisation. Reliance on his personal diplomacy was greatly aided by his personal charm: Lord O’Brien who served as Norman’s secretary in 19431944 attested to his being the most magnetic personality he ever met (BOEA 13A127/1).

Even attributes that were accounted Norman’s weaknesses proved constructive. His preference for secrecy assisted in circumventing conflict by the simple device of keeping his long-term objectives to himself until they were likely to be supported.

Perhaps most importantly, Norman proved to have a flair for identifying recruits of quality and for leading a team of individuals with varying opinions.

In 1914, Harry Siepmann, the first Adviser to be recruited, was a civil servant in the Treasury. After serving in the Royal Artillery during the war, he returned to the Treasury and was sent to Versailles as an aide to John Maynard Keynes. By the end of the conference, he shared the disgust which Keynes expressed in The Economic Consequences of the Peace, and resigned from the Treasury to work in East Europe (TNA:T1/12347/28789). He then joined the Bank’s staff to support Norman’s European diplomacy. Siepmann was thus a little recognised link between Norman and Keynes’ thought. He instinctively shared Norman’s understanding that financial reconstruction depended upon re-building the monetary institutions of central Europe and his belief that negotiations would be more likely to succeed if conducted between bankers.

The success of Norman’s recruitment is demonstrated by the subsequent careers of the Bank’s Advisors. Taking three as examples: Cameron Cobbold was to become Governor and Lord Chamberlain, Humphrey Mynors became Deputy Governor and Henry Clay became Warden of Nuffield College, Oxford.

Management of such a high-powered but disparate group would have been beyond many. Kershaw, another of the Advisers, recalled that for Norman, individuals mattered more than institutions. Once the right man had been found, it was the institution’s responsibility to trust him (BOEA:6A196/1).


In Norman, the Bank found a man who had the skills needed to accomplish the transformation which a changing world made necessary.

This does not mean that all his judgements were wise. Controversy still surrounds many of his policies such as the timing of the restoration of the Gold Standard, the effect of restoring the Gold Standard on Europe’s political stability, and its effect on the stability of British industry.

Nor does it mean that Norman’s approach to management would always be appropriate. His disregard for journalists and his distaste for explaining policy choices were ill-suited to the duty of public accountability implicit in the Bank’s assumption of broader public responsibilities. Moreover, the reliance on personal influence would ultimately prove an inadequate basis for overseeing financial markets.

Nonetheless, Norman’s approach was invaluable for it enabled the Bank to transform itself. By 1944, the Bank was no longer constrained by its traditions and managed by part-timers, but was professionally managed and self-confident. That self-confidence was to be as important for the Bank’s independence as provisions in an Act of Parliament.

Chris Swinson is currently writing a biography on Montagu Norman.

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4 thoughts on “Montagu Norman and the transformation of the Bank

  1. Interesting article, but I was struck by the sentence: “Siepmann was thus a little recognised link between Norman and Keynes’ thought.” I’m not sure what Keynes would have made of that: he once remarked of Norman that he was “always utterly charming, always utterly wrong”!
    Separately, it’s worth noting that the Bank’s current Threadneedle Street building, built during his Governorship, is a veritable shrine to Norman. It is littered with paintings and busts of him in the Parlours. Most striking of all is the full length statue of him on the Parlours wall in the Garden Court in flowing robes, matched by a statue of Charles Montagu, Chancellor of the Exchequer when the Bank was founded. So you have the name Montagu Norman staring at you if you trouble to look.

  2. From the point of view of the financial press, Norman’s refusal to communicate except with a few selected journalists may seemed attractive at the time, but its attempt to isolate the bank from public opinion and debate in the long run became counter productive and undermined the Bank;s credibility – even in the 1980s the Bank saw its press department as ‘keeping the press out of the bank and the bank out of the press.’
    Professor Steve Schifferes (new history of the financial press in the UK just published as a chapter in Edinburgh University Press History of the British and Financial Press 1990-2017

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