Business

UK's new central bank boss has clout

Phillip Inman

The UK's finance minister, George Osborne, has sprung a surprise by putting Canada's central bank chief in charge of the Bank of England.

Britain's Chancellor of the Exchequer George Osborne (left) speaks with Italian Finance Minister Vittorio Grilli. (AFP)

Mark Carney, the current governor of the Bank of Canada, is largely unknown outside of the cloistered circles of central bankers and financial regulators, but has gained a reputation as a tough operator able to confront major banks at the heart of the financial crisis.

Osborne said Carney would bring a wealth of experience to the job, which from next year will include acting as the City's top watchdog alongside setting interest rates and monetary policy.

In appointing a foreign national to the top job at the Bank of England, the minister rejected several high-profile British candidates, including the current deputy governor and frontrunner for the job, Paul Tucker, and the chair of the UK's Financial Services Authority, Adair Turner.

Carney is the first governor in the Bank's history to be appointed after an open recruitment process, in which the role was advertised and ­candidates interviewed by a panel.

Osborne said he had recommended Carney to Prime Minister David Cameron, who in turn recommended him to the Queen for appointment.

The minister said Carney was "the outstanding central banker of his generation with unparalleled expertise in financial regulation".

Fresh perspective
He told MPs: "He will bring a fresh perspective. He has got what it takes to help bring families and businesses through these incredibly challenging economic times.

"My responsibility was to get the best for Britain, and with Mark Carney we've got that."

Born in Canada, the 47-year-old intends to bring his British wife and four children to the UK and apply for British citizenship. But he rejected the treasury's stipulation that the new governor serve for a single eight-year term in favour of a contract that runs for only five years.

The shadow finance minister, Ed Balls, welcomed the appointment, saying he had worked with Carney on several occasions and found him to be an impressive character who was well qualified to take on the role.

Labour backbench MPs joined the chorus of approval, with one describing Carney as a breath of fresh air.

Constructive role
City analysts said that, although they were surprised by the appointment, Canada's ability to survive the financial crash had boosted the status of its central bank boss.

Carney said he had strong ties to the UK, not only through his wife's family but also from working there for a decade and making contacts with UK businesses and financial institutions over recent years.

He said: "I think I can play a constructive role in relaunching the institution in its new role in promoting financial stability and the regulation of financial services."

But there will be some who question why an outsider with little in-depth knowledge of the UK economy should take on the country's most powerful regulatory job. He will need to manage a nine-strong monetary policy committee with eight people who have a much deeper and broader knowledge of the business culture and economic quirks of the UK economy than he has.

Canada is credited with surviving the financial crash largely unscathed, though it suffered crippling banking crashes in the early 1990s, after which it put in place strong regulations.

Osborne wants Carney to carry through a raft of structural reforms to City regulation. The Bank of England will become the main regulator, taking responsibility for making sure the financial system becomes robust enough to withstand a future crash of the same magnitude as the 2008 credit crunch.

Osborne said: "It says something of Mark Carney's abilities that he was chosen by the world's financial regulators to run the global regulator, the Financial Stability Board." – © Guardian News & Media 2012

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