Bank of England Governor Mark Carney has announced an overhaul of the country’s central bank, saying the almost exclusive focus by central banks on inflation in the past was "fatally flawed".
Mr Carney also said that scandals in the Libor interest rate and more recently foreign exchange markets showed the need for changes to make markets fairer and more efficient.
In a speech to announce the results of a nearly six-month review into the workings of the BoE, Mr Carney said the Bank's different monetary and bank regulation functions needed to be brought closer together.
The fight by central banks against inflation had brought 15 years of price stability and growth. But "with time, a healthy focus became a dangerous distraction," he said.
"In my view, while there were enormous innovations of enduring value during this period, the reductionist vision of a central bank's role that was adopted around the world was fatally flawed," Mr Carney said.
"In particular, it failed to recognise that financial stability is as important an objective of macroeconomic policy as price stability, and it downplayed the interrelationships between the two."
Earlier, the BoE and the government announced the appointment of two new deputy governors and other changes in top management as part of the shake-up at the Bank.
Mr Carney said Paul Fisher, the Bank's executive director for markets, would move to a new role as deputy head of the Prudential Regulatory Authority, the wing of the BoE charged with ensuring banks do not build up excessive risks.
Mr Fisher has been under fire from lawmakers over the BoE's handling of alleged manipulation in London's currency markets.
Mr Carney said in his speech it was fundamental that the way markets are run is overhauled in the light of recent scandals.
"Given the serious issues raised by the Libor and foreign exchange scandals, changes must be made to both the hard and soft infrastructure of core markets to ensure they are fair, effective and efficient," he said.
Mr Carney promised a change of culture at the Bank and the way it works with the banking sector.
"If there are some similarities in roles, how we will discharge them will be fundamentally different," he said, referring to the BoE now and in the past.
"The age of informal responsibilities, nods, winks, secrecy and instinct is long past."
Carney said the Bank would work more with outside researchers as a way to improve its forecasting and analysis functions, which have come under criticism in the wake of the financial crisis.
He also said the Bank would review the case for releasing transcripts of policy meetings after some years, something the US Federal Reserve does and which would help make the BoE more transparent.
Shafik - who has Egyptian, US and British nationality - has been the IMF's deputy managing director since April 11 and before that was the top civil servant at Britain's overseas aid department.
She will be responsible for the BoE's eventual exit from its quantitative easing policy - under which it amassed £375 billion of government bonds - as well as reviewing the way the central bank gathers intelligence on markets which has come under scrutiny recently after claims that London traders manipulated key foreign exchange rates.
Broadbent was formerly an economist at investment bankGoldman Sachs and is the first external member of the MPC to take up a position as deputy governor at the central bank.
He will be responsible for the BoE's analysis of Britain's economy, as well as bank notes.