LONDON, (New York Times) — In a surprising departure from convention, the British government on Monday selected Mark J. Carney, the head of the Canadian central bank, to succeed Mervyn A. King as the next governor of the Bank of England. The appointment ended months of jockeying by some of Britain’s most prominent public officials. [...]

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Canadian to run Britain’s central bank – Bank of England

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LONDON, (New York Times) — In a surprising departure from convention, the British government on Monday selected Mark J. Carney, the head of the Canadian central bank, to succeed Mervyn A. King as the next governor of the Bank of England.

The appointment ended months of jockeying by some of Britain’s most prominent public officials. As a result of changes to take effect next year, the job will come with sharply enhanced powers.

The odds had been seen as heavily favoring the Bank of England’s deputy governor, Paul Tucker. The decision to select a foreigner to lead the bank, Britain’s most storied financial institution and the equivalent of the Federal Reserve in the United States, came as a shock when George Osborne, the chancellor of the Exchequer, broke the news during a session of Parliament.

The appointment was arguably the most significant in the bank’s 318-year history. Mr. Carney will not only be the first foreigner to lead the bank, but will also take responsibility for the health of the British financial system.

Besides doing the traditional job of setting interest rates, the central bank will directly regulate and oversee the country’s banks and other financial institutions. Until now, such regulation and oversight has been primarily the job of the Financial Services Authority, which will be scrapped.

“I see this as a challenge and I’m going to where the challenge is the greatest,” Mr. Carney said at a news conference in Ottawa.

Mr. Carney will assume the governor’s post in July, and the pressures facing him will be immense. Not only must he decide whether to continue Britain’s aggressive money-printing programme aimed at stimulating the economy, he must also ensure that the central bank’s independence and reputation are not sullied by an investigation into the manipulation of key interest rates by commercial banks. Indeed, the decision to pick Mr. Carney seems to have been heavily influenced by the taint of the interest-rate scandal that, although it has largely subsided, remains attached to Mr. Tucker.

As the scandal was erupting this year, the disclosure of e-mail exchanges dating to 2008 between Mr. Tucker and Robert E. Diamond Jr., the chief executive of Barclays at the time, suggested that Mr. Tucker might have supported the idea of keeping rates artificially low.

Mr. Carney, a former Goldman Sachs executive, is widely admired for the steady job he has done in preserving financial stability in Canada in the face of pressures that have shaken other countries.

The Bank of England’s new heft represents a stark shift from the era of light regulation that held sway before the financial crisis, in which its ability to issue warnings and intervene in banking excesses were constrained.

“This is a new job,” said Simon Hayes, an economist at Barclays. “Previously, the focus was mainly on monetary policy. Now, it is about financial stability, monetary policy and macro-prudential policy. The key is to get the right mix of policy and making sure there is proper coordination” with the Exchequer, or British Treasury.

Mr. King, who will remain as central bank governor until next summer, has emerged as Britain’s most vociferous critic of irresponsible bank behavior. But he has also been criticized for acting too slowly in 2007 to bail out Northern Rock, the mortgage lender whose collapse that year was the onset of Britain’s financial crisis.

The central bank’s broader regulatory powers will be wielded by a newly formed Financial Policy Committee, operating inside the bank and presided over by the governor. The framers of the new structure hope the bank will be better able to sniff out early warning signals, like excessive risk-taking and borrowing by the banks, and move to defuse a crisis — something it was not able to do in 2007.

Reflecting the importance of the position, Mr. Osborne cast a wide net in searching for a successor and took the unusual step ofconsidering candidates from outside Britain. The names of prominent investment bankers also surfaced as potential chiefs, indicating the hunger for an innovative appointment.




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