LONDON: Britain named Canadian central bank chief Mark Carney on Monday to head the Bank of England, springing the surprise choice of a foreigner to push reform of its troubled financial system.
A former Goldman Sachs investment banker who at the Bank of Canada guided the Canadian economy through the global economic crisis, Carney will succeed Mervyn King who retires in July.
Carney, who already plays a leading role in setting global banking rules, defended his departure from Canada and signaled that bigger problems awaited him in London.
“I’m going to where the challenges are greatest,” he told an Ottawa news conference, stressing the need to “rebalance” the economy which has relied heavily on a financial services sector hit by huge losses and scandals.
“It’s very important for the global economy that the UK does well, that it succeeds in this rebalancing of their economy, that the reform of the British financial system is completed,” he said.
Carney will become the first non-British head of the central bank in its 300-year history, beating hot favorite BoE deputy governor Paul Tucker to the post, which will pay a salary of 624,000 pounds ($1 million).
During the crisis, Carney helped to make Canada’s recession one of the shallowest of the world’s richest nations. No Canadian bank needed government help, and the country recovered all the jobs it lost in the downturn relatively rapidly.
By contrast, Britain had to bail out Royal Bank of Scotland and Lloyds Banking Group, and the world’s sixth-largest economy is still struggling to achieve growth four years after the crisis broke.
Carney, 47, will remain as head of the Financial Stability Board (FSB), a Basel-based body that sets global banking rules, when he moves to London next year, although the Bank of Canada itself does not regulate the country’s banks.
“I believe he will bring the strong leadership and external experience that the Bank (of England) itself needs as it takes on its heavy new responsibilities for regulating our banking system,” Chancellor of the Exchequer George Osborne, the finance minister, told parliament in announcing the appointment.
Carney will stay at the Bank of Canada until May, and starts at the Bank of England in July. He will serve a five-year term, rather than the eight years that had been expected for the next BoE governor.
From next year the BoE will take charge of British financial regulation, almost doubling its size. This boosted the case for a governor with strong management skills and financial market experience, rather than someone in King’s academic mould.
Carney’s past as a Goldman Sachs investment banker has been a double-edged sword, as he fought to prove his loyalties lie with ordinary citizens, not his high-flying banker ex-colleagues. He clashed memorably last year with JPMorgan Chase & Co Chief Executive Jamie Dimon in Washington, when the U.S. banker argued against new regulations for the financial sector.