26th November 2012
The governor of Canada’s central bank Mark Carney is to become the new governor of the Bank of England when Sir Mervyn King steps down next year.
The Chancellor George Osborne has always been a fan of Carney but the man himself had previously ruled himself out of the running. It is possible that an offer of a single five year term, rather than the previously established two terms of four years helped sway Carney. It also has the benefit of removing any suspicions of political interference surrounding any reappointment for a second term.
The Chancellor was unsurprisingly full of praise for Carney.
He said: “Mark Carney is the outstanding candidate to be governor of the Bank of England and help steer Britain through these difficult economic times. He has done a brilliant job for the Canadian economy as its central bank governor, avoiding big bail outs and securing growth.
“Along with its central role in monetary policy, this Government has put the Bank of England back in charge of regulating our financial system so that we do not repeat the mistakes of the last decade. Mark Carney is the perfect candidate to take charge of the Bank as it takes on these vital new responsibilities. He will bring strong leadership and a fresh new perspective.”
The reaction from Canadian politicians is a mixture of regret at losing such a successful banker and regulator who successfully steered Canada's through the financial crisis mixed with a little bit of pride, that Carney is in such demand.
The news will probably be most disappointing for deputy Bank of England governor Paul Tucker. Tucker’s star may have fallen recently, when he was dragged into the Libor fixing controversy, which he arguably had responsibility for policing.
The Government’s banking reviewer Sir John Vickers was also seen as a strong candidate. The others included Sir Gus O’Donnell, the former cabinet secretary and Financial Services Authority Chairman Adair Turner, seen as one of the more radical thinkers among the list of candidates.
But what about Carney? Well we will no doubt get to know him very well in the next few weeks, but Mindful Money has trawled some US and Canadian websites to bring you some initial views.
The Wall Street Journal remarks on just how powerful the post will be.
It writes that “Mr. Carney will become the 120th governor of the Bank of England just as it inherits sweeping new powers, making it one of the world's most powerful central banks and boosting the governor's status as one of the U.K.'s most powerful individuals.”
Canada’s MNI News reports a Carney speech from earlier this month, in which he said that regulation of financial institutions had not gone far enough because many financial institutions remained too big to fail i.e. that governments could still be on the hook if the institutions faltered.
Carney said: “By restoring capitalism to the capitalists (making the institutions responsible for their losses in times of trouble), discipline in the system will increase and, with time, systemic risks will be reduced. [The largest banks] enjoy lower borrowing costs owing to direct support and implicit government guarantees. The moral hazard problems associated with implicit public support may amplify risk-taking, reduce market discipline, create competitive distortions, and further increase the probability of distress."
Canada’s Business Post reports recent remarks on household debt – in Canada of course. Talking to Canada’s House of Commons, he said: “We do have a domestic risk which bears attention, which is the level of household indebtedness. This is a risk that we and others have been flagging for some time.”
To get a measure of the man, Canadian broadcaster CBC reruns an interview with Carney.
He may find that particular horse has already bolted out of the stable in the UK.
Finally and most intriguingly, Canada’s version of the Huffington Post reported that some activists in the country’s centre-left Liberal Party wanted Carney for leader and even started a Facebook campaign to that effect.
The report also notes that Carney described Occupy as constructive and criticised Canada’s corporations for hoarding cash.
So not totally conventional then, at least for a central banker. But no doubt we’ll learn much more, next year while Mr Carney learns more about the UK economy too. Let's hope he doesn't regret taking the job, when he looks at the books.