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Mark Carney appointed Bank of England governor


New governor to carry more clout in wake of the FSA's demise

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Canadian central bank governor Mark Carney has been appointed as the new governor of the Bank of England for a five year term.

Outgoing governor Sir Mervyn King’s successor was revealed by UK Chancellor of the Exchequer George Osborne on Monday. King will step down from the governorship at the end of June 2013.

Following the coalition government's decision to close down the Financial Services Authority (FSA) and pass some of its responsibilities for banking oversight back to the Bank, the new governor will also oversee important regulatory powers atop his responsibilities as the chair of Bank’s interest rate setting Monetary Policy Committee (MPC).

In a surprise move, Carney beat the favourite and current deputy governor Paul Tucker to the post. Addressing the House of Commons, Chancellor Osborne said, "Mark Carney is acknowledged as the outstanding central banker of his generation. He brings strong leadership and external experience the Bank needs."

Carney will continue in his current positon in Ottawa until 01 June 1 before taking over at the Bank of England on 01 July. Additionally, MPC member Charlie Bean will serve for an extra year.

Welcoming the appointment, outgoing Bank of England Governor Sir Mervyn King, said, "I am delighted to welcome Mark Carney as my successor. He represents a new generation of leadership for the Bank of England, and is an outstanding choice to succeed me. Since he became Governor of the Bank of Canada, I have worked closely with him and admired his contributions to the world of central banking, in which he is widely respected."

Speaking in Ottawa, Carney said he was honoured to accept such an important and demanding role, and to succeed Sir Mervyn King with whom he had worked closely over these past five years and had learned so much from.

“This is a critical time for the British, European and global economies; a decisive period for reform of the global financial system including its leading financial centre, the City of London; and a crucial point in the Bank of England’s history as it accepts vital new responsibilities,” he added.

Canadian finance minister Jim Flaherty described Carney’s UK appointment as a “bittersweet” moment for his country. Wishing Carney well, the minister said, “It’s a place of pride that for the first time the UK had called in a foreigner who happens to be Canadian to run its Central Bank.”

The financial markets' response has been widely positive but one of shock that deputy governor Paul Tucker did not get the top job.

Peter Dixon, strategist at Commerzbank, said Carney was the one guy he did not have in the running. “It's a slap in the face for the likes of Paul Tucker and all those other guys who were hoping to step up to the plate. Will it change anything? For the moment not really. It's a 9 person MPC, one man isn't going to go in there and change the world straight away.”

Sebastien Galy, forex analyst at Société Générale Americas, said a sought after professional like Carney had to eventually move along from the Bank of Canada.

“Overall perhaps, the announcement is not good for the Canadian Dollar given now that they have a loss of credibility, but that is temporary! One may take it as a reason to buy the Pound Sterling with someone new who understands markets and financial stability in charge,” he added.

Philip Shaw, UK economist at Investec, said one factor in Carney's favour is that Canadian banks were very highly regulated before the global financial crisis and accordingly the Canadian banking system is in good shape.

“Given that experience that might have been a factor in swinging the job. One thing we would expect is the new governor sets about delegating responsibility very quickly given the enormity of the tasks that the Bank of England is taking on,” Shaw said.

Howard Archer, chief UK economist at IHS Global Insight, felt the appointment reflected the view that now is a good time to have a complete new broom within the Bank of England following Sir Mervyn King’s dominant position and that this was easier to achieve with a complete outsider.

“Certainly, there had been growing calls for a complete change of culture within the Bank of England, with less deference and the encouragement of the voicing of alternative views. For all of Paul Tucker’s strong qualities and experience, there was some concern that he had spent his entire career within the Bank of England, so may find this harder to achieve,” Archer said.

“Secondly, the Bank of England is taking on a much wider and larger role, by assuming much more responsibility for the stability of the financial system and bank supervision…Carney will be seen as offering strong qualities and a top class reputation in this area, highlighted by his being head of the Financial Stability Board (the regulatory body that sets international banking rules),” he added.

Photo: Mark Carney © Reuters file photo, October 2012.

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Mark Carney appointed Bank of England governor
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