Why Bank of Canada's man will probably stay in Ottawa
We should be sceptical about press reports linking Carney to Bank of England post
by William Keegan
Tue 24 Apr 2012
Just how many central banks can a highly respected official govern simultaneously?
The answer, of course, is one. This is why there was always something fishy about the recent bout of press speculation that Mark Carney, 47, Governor of the Bank of Canada, was being sounded out to succeed Sir Mervyn King, who is due to step down from the Bank of England at the end of June 2013.
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Carney's term at the Bank of Canada is due to run until 2015. To support the theory that he is the man most wanted by the powers that be in the UK, we have been told such titbits as that his wife is English and he is used to working in London! (He was in the British capital when employed by Goldman Sachs).
Big deal! Hardly enough supporting evidence that he wishes to abandon his post. Indeed, the Bank of Canada governor has denied that he has even been approached, and insists that he remains focused on his present job.
I met Carney in Davos a few years ago. We were the only two occupants of the carriage in the funicular railway taking us down the side of the mountain from a party. He proudly informed me that Canada had not had a banking crisis - the banks over there are as cautious as ours used to be in the good old days. Of course, the Canadian economy, especially in the provinces of Ontario and Quebec, is so closely linked to the US that, banking caution notwithstanding, it was hit by the Great Recession. However, that banking prudence must have had something to do with the fact that in 2009 the reduction in Canadian GDP, at 2.8%, was much lower than the G 7 average.
Carney's practical knowledge of the commercial paper market is said by close students of the Canadian scene to have played a crucial role in the Bank of Canada's response to the financial crisis. You can see why someone might have come up with the idea of Carney for Threadneedle Street. As chairman of the Financial Stability Board, the body that is trying to make the global financial system function rather better than in recent years, he is a power in many lands. But he can be Governor in only one.
Anyway, even if Carney did want to respond to overtures, the days of behind-the-scenes fixing of these appointments are well and truly over. As a result of pressure from the House of Commons Treasury Committee, and initiatives by former Chancellor Alistair Darling, the job of Governor of the Bank of England now has to be advertised and the process of appointment subject to intense scrutiny.
As I wrote in the April issue of the OMFIF Monthly Bulletin, all the speculation about Sir Mervyn's successor had begun so early that one wondered whether there might be a secret plan for him to retire early.
However, if the premature speculation has achieved one thing, it has smoked the Treasury out and prompted Chancellor George Osborne to announce that the process for appointing the next
Governor will not begin until the autumn. This is in keeping with well-established precedence. And the Chancellor has tried to quash suspicions that Sir Mervyn is a 'lame duck' by stating: 'The Governor still has a quarter of his term to serve. He is doing an excellent job.'
The job will be advertised. People will have to apply. A shortlist of candidates will be interviewed. Can you imagine the Governor of another country's central bank, with three years of his contract still to run, applying and being interviewed?
Call me naïve, but I am deeply sceptical. I would wager that Carney will stay in Ottawa.
William Keegan is Chairman of the OMFIF Board of Contributing Editors, and Senior Economics Commentator for the Observer.