Bank of England's average annual legal spend more than triples

image616x372 (36)

The Bank of England’s (BoE) average annual legal spend has more than tripled during the past three years, figures obtained by a freedom of information request have revealed.

From 2011 to 2013, the BoE’s annual legal spend was £2m per year, but for the three subsequent years, the average figure has risen to almost £7m.

The bank spent £4.7m on external counsel in 2014, followed by £8.7m in 2015 and £7.4m in 2016.

One major contributor to the bank’s recent legal spend has been the 2014 inquiry into the extent of its involvement in the foreign exchange market scandal. Travers Smith and One Essex Court’s Lord Grabiner QC led the investigation, which racked up total costs of £2.9m, eventually exonerating bank officials from claims they were involved in or were aware of rate rigging. Travers was paid £2.2m for its work, with Lord Grabiner QC receiving £401,000.

The increase has also been driven by the UK’s overhaul of financial regulation in 2013, which handed the BoE increased responsibility for the financial stability. The break-up of the Financial Services Authority (FSA) in 2013 led to the creation of the Financial Conduct Authority (FCA), the Prudential Regulation Authority (PRA) and Financial Policy Committee (FPC), with the latter two falling under the BoE’s remit.

A source close to the BoE said: “The fact is, the bank is now an extraordinarily different animal with extraordinarily different statutory responsibilities.”

The Global Economic Outlook: Mark J. CarneyThe expansion of the bank’s regulatory remit coincided with the 2013 appointment of governor Mark Carney (pictured), who took up the role after five years as governor of the Bank of Canada.

A source close to the bank said: “The influence of Mark Carney has also had an effect [on legal spend]. He does not come from a culture that finds law a nuisance – instead, he places a lot of emphasis on legal analysis before the event.”

The size of the BoE’s in-house legal department has risen significantly in the past three years, growing almost 50% from 46 lawyers in 2014 to 68 in 2016. This increase has come on the back of a number of additions to the bank’s in-house legal team in recent years, including the PRA’s regulatory action division, which handles investigatory and enforcement work.

The bank refused to disclose the amount it has spent on individual law firms in recent years, but it has historically used Freshfields Bruckhaus Deringer for its most significant legal work. The magic circle firm advised the bank last year on the economic shock of the Brexit vote, as well as the fallout from the Libor scandal in 2012.

In January 2013, Legal Week reported that Freshfields had received more than £14m in legal fees from the bank since March 2008. The second highest biller during that same period was Clifford Chance, with total fees of £1.4m, while other firms to have handled work for the bank include Travers, Bird & Bird and Kirkland & Ellis.