April 18, 2012 8:04 pm
News that Mark Carney, governor of Canada’s central bank, has been informally approached to be a candidate to replace Sir Mervyn King at the Bank of England will unsettle those of the old school. Save for Stanley Fischer, a US citizen who has been the Israeli central bank governor for the past seven years, central banks have rarely been run by foreign nationals.
What is incontestable is that the BoE should cast its net widely, given the momentousness of the choice facing George Osborne when the chancellor decides who should replace Sir Mervyn next year. It is very different from the compact academic hothouse the governor inherited in 2003.
The BoE’s role has expanded to include prudential regulation and banking supervision. Once its merger with the Financial Services Authority is complete, it will be the most complex central bank in the world. To exercise its huge new powers over the financial system, the next governor will need diverse skills, including deep market knowledge, political nous and strong management abilities.
Sir Mervyn himself received a discreet coronation, having been drawn from a shortlist of one. His successor, however, must face the rigour of competitive selection. Fortunately the list seems both plural and strong. It includes insiders such as a deputy governor, Paul Tucker, and the chairman of the FSA, Adair Turner. There is a smattering of non-BoE names. Those spoken of include former cabinet secretary, Sir Gus O’Donnell, and Sir John Vickers, who headed the banking commission. None ticks all of the boxes. But most tick more than one.
Assuming he is interested, which is uncertain, a highly regarded banker such as Mr Carney would be an adornment to this list. Nonetheless, the colour of his passport, while not an insuperable obstacle, should give Mr Osborne pause.
The central bank governor is not just some technocrat, but the most powerful unelected official in the country. His role has become more political since the crisis, not less, and will be even more sensitive when the BoE acquires new powers to avert financial crises. The next governor must win public acceptance and possess sharply honed political antennas. This might be harder for a foreigner.
Mr Osborne should remain open-minded and choose the strongest candidate, bearing all these managerial and political factors in mind. The City may now resemble Wimbledon, a British tournament in which the stars are all foreign, but the BoE remains a special case.
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