Central Banking

Canadian Mark Carney to Run Bank of England


Mark Carney, governor of the central bank of Canada, speaks at a Canadian Auto Workers convention in Toronto on Aug. 22, 2012

Photograph by Norm Betts/Bloomberg

Mark Carney, governor of the central bank of Canada, speaks at a Canadian Auto Workers convention in Toronto on Aug. 22, 2012

Chalk one up for British openness. Britain reached across the Atlantic for a new chief of its central bank, picking the governor of the Bank of Canada to become the new governor of the Bank of England. It’s hard to imagine the U.S. doing anything of the sort—picking, say, a French citizen to run the Federal Reserve after Ben Bernanke steps down.

“It goes to show that Canada exports more than just wheat, copper, and natural gas,” says David Rosenberg, chief economist and strategist of Gluskin Sheff & Associates, a Toronto-based wealth management firm.

To be sure, the 47-year-old Carney knows Britain well. He got his master’s and Ph.D. degrees in economics from Oxford University and he worked for Goldman Sachs (GS) in London early in his career. His leadership of the Financial Stability Board, an international body of banking regulators, has put him in close and regular touch with British authorities.

What’s more, Canada and Britain have deep historical ties. Britain’s territories north of the U.S. didn’t form a dominion until 1867 and didn’t gain full autonomy from Britain until 1931. Only in 1965 did Canada finally remove the Union Jack from its flag.

But it’s equally true that the Bank of England has a tradition of welcoming outsiders. Bloomberg News notes that the bank’s rate-setting 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.”

Mark Cliffe, the London-based chief economist of ING Group, says the surprise appointment of the Canadian marks a “fresh start” for the venerable Bank of England that “is likely to break up the rather parochial debate” in Britain over how to cope with economic weakness and financial instability. Cliffe says Carney’s expertise in regulation will be crucial as the Bank of England takes on expanded supervisory duties, especially since fragility in the financial system is complicating the central bank’s efforts to revive growth. “Until you get financial stability, monetary policy isn’t going to work.”

Carney has headed the Bank of Canada since February 2008. His term was supposed to last seven years. He has committed to running the Bank of England for five years. “He quite simply is the best and most experienced person in the world to be the next governor to the Bank of England,” Chancellor of the Exchequer George Osborne said in a statement to Parliament announcing the move.

Coy_190
Coy is Bloomberg Businessweek's economics editor. His Twitter handle is @petercoy.

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