No one is saying that David Miles, the highly respected former chief economist at Morgan Stanley, should not be joining the Bank of England’s Monetary Policy Committee.

However, the Commons Treasury Select Committee is surely on to something when it points out — as it did yesterday — that a potential conflict of interest has been created, since Professor Miles is already a non-executive on the Financial Services Authority board.

Normally the Bank’s Deputy Governor for Financial Stability, currently Paul Tucker, would have a seat on the FSA’s board, creating a bridgehead between the two. Now there is a second cross-membership of the two institutions.

As Andrew Tyrie, one of the MPs on the committee points out, this may lead to problems. He respects Professor Miles hugely but argues that, since he is being appointed as one of the MPC’s four explicitly independent members, there is a danger this independence could be seen to be compromised.

If, at some point in the future, there is a “blame game” between the two institutions, it could prove very awkward for Professor Miles. Moreover, it creates potential difficulties for Mr Tucker, who is supposed to be the official link-man between Threadneedle Street and Canary Wharf. Now there is a second, semi-official, link.

Professor Miles revealed yesterday that he had asked Bank Governor Mervyn King and FSA chairman Lord Turner if there was a problem, with each saying no. But that seems unusually relaxed given the details, aired in recent days, of the sensitive relationship between the Bank and the FSA.

Closer ties between the two institutions ought be a good thing. However, since the pair’s respective roles in a new regulatory framework are up for renegotiation, there is currently too much scope for conflict — especially if the Bank’s powers are strengthened at the FSA’s expense. It would be best, for now, if the professor held just the one post. Ideally, this would be at the Bank, where his abilities and insights will be more valuable.

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