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Mark Carney named as new Bank of England governor
Mervyn King to be replaced by Bank of Canada governor, a surprise choice for the job.
Mark Carney has been named as the new governor of the Bank of England, replacing Mervyn King at the head of a central bank which is still in crisis mode as the economy falters.
Carney, currently governor of the Canadian central bank, will take over a newly empowered institution when he replaces King in June, after the Bank is given new powers to regulate banks.
The Canadian – who described his new role as a 'major challenge' – is credited with shielding Canada's economy from the worst of the financial crisis, with none of the country's banks needing bail-outs. He has also recently said that banks should use their profits to boost capital rather than pay bonuses.
Having spent 13 years at Goldman Sachs, Carney joined Canada's central bank in 2003 and was made governor five years later.
Quizzed at a press conference about his decision to relinquish his role at the central bank of his native Canada, Carney emphasised that he had previously lived in the UK for ten years, while claiming to 'know a lot of people in the City and the UK'.
Biographical note: Mark J. Carney
Mr. Carney was appointed Governor of the Bank of Canada effective 1 February 2008, for a term of seven years. As Governor, he is also Chairman of the Board of Directors of the Bank.
In addition to his duties as Governor of the Bank of Canada, he serves as Chairman of the Financial Stability Board (FSB) and as a member of the Board of Directors of the Bank for International Settlements (BIS). Mr. Carney is also a member of the Group of Thirty, and of the Foundation Board of the World Economic Forum.
Born in Fort Smith, Northwest Territories, Mr. Carney received a bachelor’s degree in economics from Harvard University in 1988. He received a master’s degree in economics in 1993 and a doctorate in economics in 1995, both from Oxford University.
Prior to joining the public service, Mr. Carney had a thirteen-year career with Goldman Sachs in its London, Tokyo, New York and Toronto offices. Mr. Carney was appointed Deputy Governor of the Bank of Canada in August 2003. In November 2004, he left the Bank to become Senior Associate Deputy Minister of Finance – a position he held until his appointment as Governor of the Bank.
Carney, who takes the role as the UK economy effectively flatlines, commented: '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.'
Governor Carney said:
“I am honoured to accept this important and demanding role, and to succeed Sir Mervyn King with whom I have worked closely over these past five years and from whom I learned so much.
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.”
“It has been a privilege to serve as the eighth Governor of the Bank of Canada. I am proud of the Bank’s contribution to the resilience of the Canadian economy throughout an unprecedented period of global turmoil. The Bank is helping to lead the reform of the global financial system. It is introducing the most sophisticated currency in the world. And as the Government of Canada’s fiscal agent, it is providing funds management and banking services with the highest reliability and resiliency.”
“Canadians can be confident that such leadership will continue. The depth and quality of its human resources, the dedication of its employees and the clarity of its strategic vision will ensure that the Bank will continue to promote the economic and financial welfare of all Canadians.”
“I would like to thank the Board of Directors of the Bank of Canada, Minister Flaherty and Prime Minister Harper for having given me this opportunity to serve Canada. I have done so to the best of my abilities and am humbled by the support I have received from both my colleagues at the Bank and from Canadians across this great country.”
He beats favourite – and current Bank of England deputy – Paul Tucker to the role, as well as candidates including Santander bank chairman Lord Burns, Sir John Vickers, a former Bank of England economist who put his name to the government’s review on banking reform; and Adair Turner, chairman of the Financial Services Authority.
Chancellor George Osborne announced the five-year appointment in parliament today, speaking nine days before he delivers what is expected to be a gloomy Autumn Statement on the state of the economy. Osborne described Carney as 'an outstanding banker of his generation'.
'I look forward to working with Mark as we continue to rebalance our economy, deal with our debts, and equip Britain to succeed in the global race. We needed the best – and in Mark Carney we’ve got it,' Osborne added.
City economists cautiously welcomed the appointment, pointing to Carney's strong record and good reputation at the head of the Bank of Canada. They added however that it was unclear whether his appointment would alter the Bank of England's policy leaning. 'Carney is generally seen as pragmatic and astute economist, rather than one with a predilection for one particular school of economic ideas,' noted JP Morgan economist Malcolm Barr.
Rob Carnell of ING Bank said other factors would influence the central bank's choice of policies: 'The funding-for-lending scheme remains the major policy initiative right now, and its success or otherwise will likely determine whether the Asset Purchase Scheme is dusted down once more, or passed over.'
King’s tough tenure
Mervyn King became governor of the Bank in 2003, first presiding over a period known as the ‘great stability’ and then the credit crisis and financial crash that began in 2007.
King, alongside his former counterpart at the US Fed, Alan Greenspan, have been retrospectively criticised for their low interest rate policies of that time, which may have encouraged excessive lending and borrowing.
Since then, under King’s leadership interest rates have been kept at record lows, while the Bank of England has embarked on a huge asset purchase programme, spending £375 billion on quantitative easing to boost the economy. This programme has however proven controversial, with doubts about its benefits for the real economy. Meanwhile, inflation, as measured by the consumer prices index (CPI) targeted by the Bank of England, has averaged 3.2% over the past five years – above the target of 2%.
Many economists have questioned whether the Bank should slavishly stick to its inflation target. King himself used a speech last month to conclude that it was too soon to ditch the target, but that more leeway is needed to let the inflation rate drift away from 2.0% in order to take action to avert financial crises. ‘There may be circumstances in which it is justified to aim off the inflation target for a while’, the governor said.
'Upheaval' at the Bank
Osborne announced that Charlie Bean, one of two deputies at the Bank of England, had agreed to stay on for another year. But Tucker, the other deputy who was thought a dead-cert for the governor post, was not mentioned.
'Today’s appointment could well usher in a period of significant upheaval at the Bank of England,' commented Investec economist Philip Shaw.
Tucker, who has 32 years of experience at the Bank of England, may have lost out on the top job after being hauled in front of a committee of MPs this summer. He was accused of pressuring Barclays to manipulate its Libor submissions, claims that he strenuously denied.
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