In a surprising and unprecedented joint news announcements today in London, UK and Ottawa, Canada, the British government announced the appointment of Mark Carney (current Bank of Canada Governor) as the next Bank of England Governor!
“Bank of Canada governor Mark Carney will be the next governor of the Bank of England, Finance Minister Jim Flaherty announced Monday morning.
Flaherty said that Carney’s advice had “kept Canada strong,” pointing out, as he often does, that Canada has the best record for fiscal stability in the G7.
This is the first time a foreign national has been head of the Bank of England, Flaherty said, underlining how unconventional this appointment is.
Carney will continue to serve as governor of the Bank of Canada until June, and will take up his new job on July 1.“
Carney’s departure is truly a loss for Canada and a gain for UK. For those that are more informed, the talk of Carney taking the Bank of England position is not new and has long been rumoured and even addressed by Carney in his April 18th statement.
“Carney’s rumoured appointment to the Bank of England was the source of published reports last spring, and at the time he and the Bank of Canada denied the reports.
“I’m totally focused on my two responsibilities: as governor of the Bank of Canada, and the Financial Stability Board,” Carney told reporters on April 18. “I can assure you they add up to more than every waking hour of the day.”“
It is not only highly unusual that a bank governor leave in the middle of a term, and let alone leaving to become another country’s bank governor! And a country that he is not a citizen of! Mind you, “Carney said he has many ties with the U.K., pointing out he spent a decade there and his wife is a dual British-Canadian citizen.” So getting a U.K. citizenship shouldn’t be much of a problem even the British government emphasized he will go through the regular channel and not give me any special treatment. Well, after all, he has a great job waiting for him in England!
Reading the tea leaves
I am not an Economist (I am trying to arrange a chat with one to talk about this) and I am no expert in Bank of Canada or Bank of England so my guesses may be as good as yours. First, Carney’s answer to a reporter’s question “What made you change your mind?” (video) this morning is worth watching again. Here are a few points:
1) Carney never applied through the formal process for the job of Bank of England Governor.
2) The discussion really intensify in the last two weeks.
3) A transcript of what Carney said with emphasis added by me to highlight,
“I will say what changed my view (39s mark) on doing this is that I had an opportunity to reflect on where this institution stood, where the Bank of Canada stood, where our financial system stood, where our economy stood, and all the strengths that are there. And all the sense of purpose that is there, and the unity and cohesiveness that the main actors have in Canada. And I weight that against the challenges that are faced in the British economy, the very positive challenges that are faced in reform of the financial system there that is on going. In many respects leading the world but has to be seen through. And then the real management challenge of an institution which obviously has the longest & most storied history of central bank but is gaining a series of new powers and needs to be relaunched consistent with those to work as effectively as possible. So where I saw strengths here and confidence here, I weight that against the needs and the real challenges in the UK and came to this decision. It is a difficult decision but I think is the right decision and I look forward to the challenge. And I look forward to the challenge/confident that exist here in Canada.“
Carney has put things very diplomatically but it doesn’t take an expert tea leaves reader to see the mention of strengths here in Canada, which reassure Carney that things won’t go bonkers (pun intended) in Canada after he leaves. And then the key sentence to me, “So where I saw strengths here and confidence here, I weight that against the needs and the real challenges in the UK and came to this decision.“
Speaking as a selfish Canadian, I wish Carney would stay as I think he is a great Bank of Canada Governor. Speaking as a Canadian with a world view and understanding that we don’t live in an isolated world anymore (meaning a serious “f*ck up” in London or Wall Street will impact us in Canada anyway), I am happy to see Carney takes up the challenges to be the next Governor of Bank of England.
By the way, for UK readers and others, Carney is plain spoken and direct in his press conferences and stuff, so I doubt Carney will start doing Fedspeak when he goes to UK.
Have a read of what the UK news media are say:
The Economist, “Taking his talents to London”
“I’m still mulling over the implications of this brave new world of international central bankers. I certainly support the internationalisation of labour markets, in central banking as elsewhere. Britain absolutely should go out and hire the best person they can find for the job.
Something about the cheering surrounding the pick strikes me as a little odd, however. It makes sense to hire an experienced regulator to help manage the Bank of England’s assumption of new regulatory powers. I worry, however, that this appointment tells us something disconcerting about monetary policy. In particular, I worry that it means that economics has done so poor a job explaining the roots of ongoing economic failures that politicians feel unable to adopt institutional reforms, or new mandates, in response to economic weakness. If governments can’t feel secure in knowing what went wrong and how to fix it, their best bet is to find people who have presided over reasonably successful economies and pay a premium for their skills, whatever those are.“
Guardian, “Mark Carney the surprise choice as Bank of England governor: Current governor of the Bank of Canada has a reputation as a tough operator and is credited with helping the country survive the financial crisis unscathed” (emphasis added)
“The chancellor said Carney would bring a wealth of experience to the job, which from next year will include acting as the City’s top watchdog alongside setting interest rates and monetary policy.
MPs on all sides of the House welcomed the appointment, with many arguing that he was capable of taming the City and preventing a repeat of the financial crisis.“
Guardian Editorial, “George Osborne and the economy: Banking on Carney: If Mark Carney is to make a difference, it can only be by changing policy”
BBC, “Mark Carney named new Bank of England governor”(emphasis added)
“The term for a Bank governor is eight years. But the chancellor told Parliament that Mr Carney indicated he intended to serve for five years and to stand down at the end of June 2018.
“Mr Osborne was keen to get his preferred central governor, because Mr Carney was widely perceived to have all the bits: he is admired by monetary economists, regulators and – allegedly – his staff (or to put it another way, he is an unusual economist and central banker, in that he is seen as a half-decent manager),” the BBC’s business editor Robert Peston said.
The governor of the Bank chairs the monetary policy committee, which has responsibility for setting interest rates in the UK.“
Independent, “New Bank of England Governor Mark Carney comes to UK for ‘greatest of challenges’ – The first foreigner to be appointed Governor of the Bank of England in its 318-year history said last night that he was “going to where the challenges are greatest”.“(emphasis added)
“He added: “I’m not without ties to the United Kingdom. My wife is a British and Canadian national; my children are both. I lived there for a decade.
“Obviously I think that I can play a constructive role as the next governor in relaunching this institution with its new responsibilities, contributing to price stability, to financial stability and to ensuring that the rebalancing of the UK economy — which is under way — is seen through over the course of the next five years.”
The appointment marks a significant coup for Mr Osborne and David Cameron, as the banker had to be persuaded to apply for the job, in the first open and advertised competition for the Bank’s governorship. Mr Carney said over the summer that he would “never” run the Bank of England.“