Bank of Canada Governor Mark Carney is going to the top job at the Bank of England.
In Monday's surprise announcement, Finance Minister Jim Flaherty said Carney will become governor of England’s central bank in 2013.
Carney, who was appointed Bank of Canada governor in 2008, has built up an international reputation as a leader in financial institutions reform in the aftermath of the 2008-09 world recession.
He said he is accepting the new job at a “decisive” time in the history of the Bank of England, which is taking on new regulatory responsibilities as Europe grapples with recessionary conditions.
Carney, 47, said it was a "difficult decision" but the right one for him.
"It’s our loss," a gloomy-looking Flaherty said in a hastily-called press conference. "It’s bittersweet," he added, noting that Canada is losing an important figure but it also is an indication of how highly regarded Carney is on the world stage.
Carney, who succeeds Mervyn King, is currently head of the Group of 20’s Financial Stability Board. He worked at Goldman Sachs Group Inc. for more than a decade before becoming a policy maker in 2003, and took over as chief of Canada’s central bank in 2008. He has pushed for tougher regulations for global lenders and clashed with banking executives over new rules requiring them to hold more capital.
His appointment was announced by Chancellor of the Exchequer George Osborne in a statement to Parliament today.
Carney, who has headed the Bank of Canada for nearly five years, kept interest rates near historic lows for the past several years in an effort to spur economic activity and growth in Canada.
He has been one of the more high-profile figures to ever occupy the governor’s position at the Bank of Canada, a traditionally staid institution that for decades kept largely out of the headlines. Carney has gone a long way to redefining that role, delivering speeches across the country on a regular basis, repeatedly urging consumers to ease up on their borrowing and publicly criticizing corporate Canada for what he said was a failure to plow enough of their profits back into productive investments.
He was also widely touted as a possible contender for leader of the federal Liberals — a suggestion he repeatedly turned aside.
Always a high flyer, Carney clearly views the new job as a chance to take on an even greater role in the world financial system.
"This is a major challenge," he told the media in Ottawa. He said it’s vital for the world economy that Britain overcome the banking problems and economic malaise it has faced since the recession hit in 2008.
"I was never going to be the governor of the Bank of Canada forever," he quipped.
When he leaves, there will be only 18 months left in his term as Canada’s central banker, Carney noted.
Carney, who has previously signaled he wasn’t a candidate for the job, defeated bids from contenders including Paul Tucker, the central bank’s deputy governor for financial stability, and Adair Turner, head of the Financial Services Authority. The appointment follows the U.K.’s first use of an application process for the position at the top of the central bank.
He’ll face an approval hearing at U.K. Parliament’s Treasury Committee before the new job, which now carries a single eight-year term, commences on July 1, the day after King steps down.
The U.K. isn’t a stranger to putting non-nationals in key positions at the central bank. Its Monetary Policy Committee has included Americans Deanne Julius, on the panel from 1997 to 2001, and Adam Posen, who stepped down at the end of August. Kit McMahon, an Australian, worked at the bank for more than two decades and was its deputy governor from 1980 to 1986.
Carney inherits an institution that has kept its benchmark lending rate at 0.5% since March 2009 to aid the economy. Annual inflation has outpaced the central bank’s 2% goal every month since the end of 2009, with consumer prices rising 2.7% in October.
The BOE is also taking increased responsibility for U.K. financial companies. The current bank regulator, the FSA, will be dissolved and a new Prudential Regulatory Authority will oversee all deposit-taking institutions, insurers, investment banks and clearing houses. It will operate under a board chaired by Carney, who will also lead the Financial Policy Committee, charged with addressing risks to the broader financial system.
In addition to those new regulatory powers, Carney will have to grapple with the bank’s response to three reports commissioned by its governing body that criticized its hierarchical culture under King.
Carney, whose term as governor began Feb. 1, 2008, had previously served as senior associate deputy minister of finance and G-7 deputy of Canada. He was also recently named chair of the Financial Stability Board.
The usual practice for selection and appointment of the Governor of the Bank of Canada will be followed. The Board of Directors of the Bank of Canada will shortly form a special committee comprised of independent directors whose mandate will be to undertake a recruitment process for the selection of the next governor, Flaherty said. The final decision on a new central bank governor in Ottawa will be made by the federal cabinet.
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