Mark Carney: The outsider wins again

The Bank's new Governor, Canadian Mark Carney, is a dark horse who is needed to bring in a new beginning, says Russell Lynch

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The Independent Online

A little-known banker in Canada called Paul Jenkins will know how the Bank of England's deputy Governor Paul Tucker is feeling right now. In 2007, the veteran of 35 years was the hot favourite to claim the Bank of Canada's top job but was pipped to the post by Mark Carney, who became the youngest central bank governor among the leading G7 nations.

Scroll forward five years and Mr Carney has done it again, overhauling a massive favourite in Mr Tucker, a Bank of England lifer, to plant the Maple Leaf flag atop the Old Lady of Threadneedle Street.

He will become the country's most powerful unelected official next July, when he succeeds Sir Mervyn King. The appointment stunned the City, and also proves the adage of never believing a story until it has been officially denied.

More than six months ago the Bank of Canada said it was "not accurate" that Mr Carney was approached as a potential candidate. The Canadian also denied it personally in an interview three months ago. Now he has leapfrogged a roster of rivals including Mr Tucker, Financial Services Authority chairman Adair, Lord Turner, and former BoE chief economist Sir John Vickers to claim the top job.

For Mr Tucker the blow is particularly savage: after a summer wobble induced by his mateyness with ousted Barclays chief executive Bob Diamond, he was seen universally as the overwhelming favourite for the job. Despite Sir Mervyn's comments yesterday that he "has much more to contribute in the years ahead", after three decades, he will surely feel that his future lies outside the bank.

So who are the City getting in Mr Carney? On paper he's an outsider, although he will seek British citizenship, but a look on his CV shows that the Square Mile is getting one of their own. A 47-year-old former Goldman Sachs veteran of 13 years, doing stints in New York, London, Tokyo and Toronto, he will have no trouble speaking to the bankers in a language they understand. After 10 years of Sir Mervyn and "the MA way", in reference to the monetary analysis unit which held sway as the central bank took on a decidedly academic bent, Chancellor George Osborne is drawing a stark line in the sand and setting a new course for the Bank of England.

But Mr Carney also ticks the boxes on the economics front, with degrees in economics from Harvard as well as a doctorate from Oxford in 1995. He knows his stuff.

Mr Carney also has a reputation as a policy hawk after taking some criticism for failing to cut interest rates swiftly in the first half of 2009. ING Bank economist Rob Carnell said: "Canada has emerged from the global financial crisis in better shape than any other G7 country, with lower public debt, and a stronger financial system. Whether this owes to great foresight or skilful policies is a moot point, but it leaves Mr Carney's reputation looking good.

"It is also worth pointing out that the BoC remains about the only G7 central bank with a tightening bias... though equally, this stance is more appropriate for Canada's own particular situation and we may find that he is quite different as BoE Governor."

Certainly the appointment continues the Chancellor's love affair with Canada after holding the nation up as the model for his own deficit-cutting strategy two years ago. But Canada's swingeing cuts in the 1990s were only possible due to strong economic growth elsewhere rather than carried out against the backdrop of a global slump. Much tighter controls on its banking system did however mean that Canada dodged the bullets of the subprime debacle.

Here Mr Carney's track record may have helped, particularly with the Bank due to take on reponsibility for bank regulation from next April. Investec's chief economist Philip Shaw said: "The Canadian banking system is widely regarded to be in good shape because of the BoC's approach to bank regulation ahead of the credit crisis."

Crucially Mr Carney can also use his status as an outsider to press on with the job of changing the culture of the Bank of England. A trio of independent reports commissioned by the Bank recently highlighted a culture of deference, where staff were reluctant to pose views unpopular with the Bank's top staff because of the potential damage to their careers. Mr Tucker was never realistically going to lead a cultural revolution.

IHS Global Insight's Howard Archer said: "The appointment... likely reflects the view that it is a good time to have a complete new broom... For all his strong qualities and experience, there was some concern that Tucker had spent all of his career within the Bank of England, so may find this harder to achieve."

After a stunning coup, and with a bulging in tray, the Canadian will have plenty of sweeping to do.

That Goldman touch: ultimate advantage

For a certain stratum of banker, it's got to be Goldman.

Whatever role Wall Street's vampire squid played in the global banking crisis it has failed to make executives who have served their dues there, including Mark Carney, the next Bank of England Governor, any less employable.

If recruiters want someone with strong operational experience, they hunt out CVs that feature early years spent at the management consultancy McKinsey. For all-out financial clout, they go for Goldman.

The bank's former chief Henry Paulson, George Bush's last Treasury secretary, was the architect of Wall Street's bailout, while Robert Rubin, who served under Bill Clinton, had a similar apprenticeship before chairing Citigroup. The list within Washington goes on.

Closer to home, Paul, now Lord, Deighton, was rewarded for his stewardship of London's Olympic organising committee with a role as a Treasury minister. Gavyn Davies, the former BBC chairman and another alumnus, tweeted Mr Carney's appointment was "a big surprise, but a pleasant one. It is a bold appointment."