By Andy Bruce and Alistair Smout
LONDON (Reuters) - The Bank of England's new deputy governor Charlotte Hogg has resigned for failing to declare a potential conflict of interest about her brother's role at Barclays Bank which had prompted an unprecedented rebuke from parliament.
Hogg, one of Governor Mark Carney's most trusted lieutenants, stepped down following the criticism by lawmakers who said the episode raised "wider concerns" about accountability at the British central bank.
Hogg admitted last week that she only revealed her brother's job guiding the response of Barclays - which is overseen by the BoE - to bank regulation when she prepared information for lawmakers who were reviewing her appointment as deputy governor.
Carney, who has said the Bank should employ more women in senior roles, had opted to give Hogg a verbal warning. On Tuesday, he stressed he felt she could have stayed.
"While I fully respect her decision taken in accordance with her view of what was the best for this institution, I deeply regret that Charlotte Hogg has chosen to resign from the Bank of England," Carney said in a statement.
Hogg was promoted to deputy governor and a seat on the BoE's Monetary Policy Committee this month, just as the central bank is preparing to steer Britain's economy through its divorce with the European Union. Hogg would have been in charge of the Bank's massive bond-buying stimulus program.
Hogg will still be present for this week's MPC decision, to be announced on Thursday, a Bank spokesman said.
Earlier on Tuesday, a committee of lawmakers said Hogg could no longer be considered suitable for her role. One committee member, John Mann, said the strength of criticism was without precedent.
Treasury Committee chairman Andrew Tyrie said: "This is a regrettable business with no winners. Ms Hogg has acted in the best interest of the institution for which she has been working. This is welcome."
Last week the Treasury Committee seized on comments from Hogg that she was compliant with the Bank's codes of conduct because "I helped to write them" as evidence of a culture of complacency inside the Bank.
Hogg said she had not shared confidential information or misused it any way. "However, I recognize that being sorry is not enough," she said in a letter to Carney and Anthony Habgood, the chair of the Bank's court, an oversight body.
A spokesman for Prime Minster Theresa May said the government respected Hogg's decision to step down.
Hogg, whose earlier career was in retail banking, became the BoE's first chief operating officer at the time of Carney's arrival at the central bank in 2013. She had a brief to modernize the BoE's management as it took on wide-ranging responsibilities for financial services.
Her family have played a prominent role in British public life, producing several generations of senior politicians and lawyers. Her brother Quintin Hogg works on the Barclays Group strategy team.
Barclays <BARC.L> declined to comment.
Hogg's appointment drew concerns from some lawmakers that it would do little to broaden the BoE's thinking.
Some critics of the Bank have questioned why the BoE was not aware that Hogg's brother was employed by Barclays.
The BoE said on Tuesday its governing court would conduct a review of the Bank's adherence to its code of conduct, examining the lessons from Hogg's case.
The bank said senior management responsibility for risk management would shift to Sam Woods, deputy governor for prudential regulation. It also announced some other changes to the reporting lines for compliance and code of conduct issues.
(Additional reporting by Lawrence White; Editing by William Schomberg and Catherine Evans)