Surprise, surprise! The Bank of England (BOE) just announced Mervyn King‘s successor but as it turns out, he ain’t a Brit! Bank of Canada (BOC) Governor Mark Carney is jumping across the Atlantic to head the BOE!
This came as a shock, as it looked like BOE Deputy Governor Paul Tucker was a shoo-in for the position. In fact, Carney also once hinted that he wasn’t a candidate for the job and that he wanted to focus on his work with his current employer, the BOC.
What makes the appointment an even bigger surprise is that this marks the first time in the 318-year history of the BOE that a foreigner will head the central bank.
Truth be told though, Carney’s resume is quite stacked and is very credible. Carney studied economics at Harvard and finished his doctorate in Oxford. He has also worked as a managing director at Goldman Sachs, and has been at the helm of the BOC since 2008. Oh, and he also just happens to be a sub-4 marathoner. What a guy!
His work at the BOC also stands out because Canada was one of the countries that did a relatively good job withstanding the global recession. In fact, no Canadian bank needed any financial aid following the 2008 financial crisis.
What appeared to be the kicker for Carney’s candidacy though, was that he wasn’t linked to the scandals that have rocked London’s financial district this past year. Take note, key rival Paul Tucker was linked to the LIBOR settlement scandal, and that may have knocked a few points off his ratings.
Who will now head the BOC? Word around the hood is that Deputy Governor Tiff Macklem may soon become head honcho. He was hand-picked by Carney himself from the Finance Department to join the BOC.
In terms of monetary policy, some analysts argue that Carney’s exit could soon prove to be bearish for the Loonie. They say that Carney had brought in his hawkish bias and without him, the bank could shift to a more neutral stance.Of course, without the BOC producing minutes of its meetings or voting records, it’s hard to really say what Carney’s stance is on monetary policy.
What’s clear though is that Mark Carney will have a lot of work to do at the BOE. Unlike Canada, which came out of the global recession almost unscathed, the U.K. financial system took a severe beating, and this led to a handful of banks getting bailed out by the government.
Moreover, Carney will have a bigger say over monetary policy than he ever did in the BOC. This means that he will have a critical role to play in steering the economy to recovery after it recently bounced out of a double dip recession.
On top of determining interest rates, he will also need to keep close tabs on British banks as the BOE has been tasked to regulate the entire British financial system.
Although he has a lot on his plate, the 47-year-old Canadian central banker is confident in taking on his new responsibilities. Not everyone is convinced though. Naysayers think that Carney be overwhelmed with the situation in the U.K., given that the BOC never needed to directly provide financial support to the banking system.
I guess we’ll just have to wait and what Carney brings to the table when he finally starts his job as BOE head honcho on July 1, 2013.
