Bank of Canada Governor Mark Carney was unexpectedly appointed as the next head of the Bank of England, succeeding Mervyn King.
Carney, 47, takes the helm of a 318-year-old institution that’s preparing to become the most powerful central bank in the world as it absorbs broad new powers to oversee the financial system and prevent another crisis. He’ll also have to guide the Monetary Policy Committee as it implements unconventional tools to stoke a recovery and battles to protect the inflation- fighting credibility earned since it won independence in 1997.
Carney is currently head of the Group of 20’s Financial Stability Board. He worked at Goldman Sachs Group Inc. for more than a decade before becoming a policy maker in 2003, and took over as chief of Canada’s central bank in 2008. He has pushed for tougher regulations for global lenders and clashed with banking executives over new rules requiring them to hold more capital. His appointment was announced by Chancellor of the Exchequer George Osborne in a statement to Parliament today.
“His CV looks terrific,” said Shamik Dhar, a former Bank of England economist and head of investment strategy at Aviva Investors, which oversees $409 billion in London. “He’s obviously an extremely good experienced leader of a central bank and is a very credible appointment. Given his background with BIS it makes it internationally credible. He’ll have quite a big upfront job getting familiar with the circumstances in the UK. But he’s not going to do badly.”
The pound erased its decline against the dollar after the announcement. It was trading at $1.6026 as of 3:47 p.m. in London, unchanged from yesterday. Government bonds stayed higher, with the yield on the 10-year gilt at 1.84 percent.
Carney, who has previously signalled he wasn’t a candidate for the job, defeated bids from contenders including Paul Tucker, the central bank’s deputy governor for financial stability, and Adair Turner, head of the Financial Services Authority. The appointment follows the U.K.’s first use of an application process for the position at the top of the central bank.
He’ll face an approval hearing at U.K. Parliament’s Treasury Committee before the new job commences on July 1, the day after King steps down. Carney plans to serve for five years, Osborne said.
“He quite simple is the best and most experienced person in the world to be the next governor to the Bank of England,” the chancellor said. “Mr. Carney will bring the fresh perspective needed.”
The U.K. isn’t a stranger to putting non-nationals in key positions at the central bank. Its Monetary Policy Committee has included Americans Deanne Julius, on the panel from 1997 to 2001, and Adam Posen, who stepped down at the end of August. Kit McMahon, an Australian, worked at the bank for more than two decades and was its deputy governor from 1980 to 1986.
Carney inherits an institution that has kept its benchmark lending rate at 0.5 percent since March 2009 to aid the economy. Annual inflation has outpaced the central bank’s 2 percent goal every month since the end of 2009, with consumer prices rising 2.7 percent in October.
The BOE is also taking increased responsibility for U.K. financial companies. The current bank regulator, the FSA, will be dissolved and a new Prudential Regulatory Authority will oversee all deposit-taking institutions, insurers, investment banks and clearing houses. It will operate under a board chaired by Carney, who will also lead the Financial Policy Committee, charged with addressing risks to the broader financial system.
In addition to those new regulatory powers, Carney will have to grapple with the bank’s response to three reports commissioned by its governing body that criticized its hierarchical culture under King.