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Surprise as Carney named Bank of England governor

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  • 26/11/2012
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Surprise as Carney named Bank of England governor
Mark Carney has seen off fierce competition to land the job of Bank of England governor, replacing outgoing chief Sir Mervyn King next summer.

The appointment comes as a shock as the majority of commentators expected Bank deputy governor Paul Tucker to take the top job.

Carney (pictured), 47, is currently the eighth governor of the Bank of Canada and the chairman of the Financial Stability Board, an institution of the G20. He will become the first foreign head of the Bank of England.

He had appeared to rule himself out of the running recently in a series of interviews, telling the BBC he “was looking forward to working with the new Bank of England governor” before adding “no” when asked directly if he was going to take the job.

Carney also 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).

He is a member of the Group of Thirty, and of the Foundation Board of the World Economic Forum, and spent 13 years working for Goldman Sachs in its London, Tokyo, New York and Toronto offices.

In a statement, Carney said he takes the role at a critical time for the UK economy. “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,” he said.

“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.”

Although King is not standing down until 30 June 2013, Chancellor George Osborne has been busy interviewing the shortlisted applicants over the past few months, and made his announcement of the chosen candidate to Parliament this afternoon.

In its advertisement for the governor’s job, the Bank said it wanted “a person of undisputed integrity and standing” who could inspire confidence and credibility within the Bank and throughout financial markets.

Tucker had been supported by many in the City even though he was embroiled in the LIBOR scandal earlier this year as emails from 2008 were published between him and Jeremy Heywood discussing Barclays’ actions.

Carney saw off competition from respected figures in the financial markets such as Lord Adair Turner and Sir John Vickers to land the job.

The salary and pension deal for the new governor is still undecided, according to reports, but King benefits from a £200,000 a year final salary pension for life, and takes home a basic salary of £305,000 a year, which has been frozen since 2010. He has reportedly refused offers of pay increases to as much as £400,000.

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Although the Canadian economy was among the few developed economies to successfully weather the global financial crisis, Carney will have no easy task on his hands in trying to manage the UK’s central bank.

The British economy is expected to continue to struggle, with many fearing it may slip into a triple-dip recession this winter. This is despite the prolonged period of low interest rates – currently at 0.5% – and the £375bn in quantitative easing unleashed by the Bank of England’s Monetary Policy Committee.

Further challenges will reveal themselves as the central bank takes over the regulation of the banking sector from the FSA next year through the Prudential Regulation Authority.

With the lacklustre economy and squeeze on liquidity, the banks will need to be careful in ensuring they are lending enough to boost businesses and the consumer without being so lax that we see a repeat of the Lehman Brothers’ collapse and the ensuing credit crunch.

The new governor will also need to consider the most sensible way to unwind the economic stimulus already pumped into the system, which could send inflation spiralling upwards in the years to come.

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