Double act at the Bank

PROFILE : David Clementi and Mervyn King Now it's the David and Mervyn show, write David Callaway and Liza Roberts

FOR David Clementi, the offer to be the next deputy governor of the Bank of England came as a surprise. For Mervyn King, it was welcome relief. Clementi, chief executive of Dresdner Kleinwort Benson and the ultimate City merchant banker, was not even on most Bank watchers' radar as a possible deputy governor, while King - the Bank's chief economist - had already been passed over twice.

In the end Chancellor Gordon Brown and Bank of England governor Eddie George took on both the outsider and the insider. "It was a classic compromise," says Prof Doug McWilliams, chief executive of the Centre for Economics and Business Research. "They got one of each."

In doing so, the Bank of England keeps a steady hand on the inflation tiller. As chief economist at the Bank since 1991, King is known for his hawkish stance on interest rates. He is also renowned for his bravura performances in the hour-long press conferences after the Bank presents the quarterly inflation report, which he prepares.

The 49-year-old economist was right behind George in his two-year battle with former Chancellor Ken Clarke over interest-rate policy. "Price stability is a timeless virtue," said King last October, in a not-so-oblique shot at Clarke. He is also believed to have fully backed the Bank's new monetary committee in raising rates both times it has met in the two months since it gained monetary independence.

Where George and King do differ, however, is over the single European currency. The governor is sceptical, but King has, so far, been more favourable.

In Clementi, the Bank gets a major City figure with a list of deals behind him which includes the top privatisations of the past 20 years, including British Telecom, British Gas and the regional electricity companies. The accountant, whose soft voice and often dishevelled appearance cloak a personality that commands respect when he begins talking, has extensive City connections. He will be the first bona fide investment banker at the top of the Bank for a decade.

Although he is only 48, it seems like Clementi has been in the City forever. His handling of the BT offering in 1984 was a watershed for privatisations in Europe. It was the first time shares in a state asset were sold outside the country, and the first time a huge effort was made to sell to individual investors. Clementi was behind a $20m (pounds 12m) advertising campaign to bring the punters into BT. "It set the world alight in terms of the involvement of individuals in these deals," says Gary Dugan, market strategist at JP Morgan, of the pounds 3.4bn BT sale. "It set the pace for most of the UK privatisations, and the model has been used in Western Europe."

Other high-profile jobs in 23 years at Kleinwort include advising on the equity sales of Laura Ashley, Abbey National and Gartmore. But Clementi's big success was pushing through the privatisations of the regional electricity firms in 1991 as they looked like coming unstuck.

"He speaks when he has a contribution to make and not otherwise," says David Luffrum, finance and planning director at Thames Water where Clementi sits on the board of directors. "And when he speaks it is constructive, with a degree of force."

Clementi was only contacted by Brown's office about three weeks ago. He had been in talks with Brown, George and Prime Minister Tony Blair for about 10 days when the news of his offer leaked last weekend. He hadn't had time to notify his bosses in Frankfurt, and the leak was an embarrassment to both the Treasury and Clementi.

Dresdner seemed to take it well, though chief executive Jurgen Sarrazin confirmed at a briefing on Dresdner's earnings that Clementi had received the offer before the UK Treasury had announced the appointment.

Clementi's expertise in putting together deals and his stature among other investment bankers could serve the Bank well if another Barings crisis erupts. When the 200-year-old merchant bank collapsed in 1995 George was criticised for not being able to put together a last-minute rescue. With Clementi's clout, the feeling is that in similar circumstances a quick rescue deal would be put in place. "He's a mixture of an academic and an entrepreneur, and it's a very powerful mix if you can get it right," says McWilliams.

The first problem Clementi may face when he begins work in September is that many of the existing powers of a deputy governor will soon be stripped away and given to his predecessor, Howard Davies.

Davies left the Bank as deputy governor on Thursday to take control of the new "Super" SIB, the unified regulator that will replace the existing Securities and Investments Board and the web of self-regulatory organisations that report to it. The Super SIB will take charge of bank supervision in the first half of next year.

That leaves Clementi, who will be in charge of financial stability at the Bank, seemingly with little to do. But observers say he will take a very similar role at the Bank to that he had at Dresdner Kleinwort, in effect a chief executive with a hand in every matter. Clementi will sit on the monetary policy committee from September, providing a welcome counterpoint to the more hawkish King and George.

"The question is whether the committee has the right balance," says James Barty, UK economist at Deutsche Morgan Grenfell. "Now, it's packed with economists. If you were to pick someone who is not an economist, you might balance it out."

Clementi went to Oxford, King to Cambridge. Both went to Harvard after graduation, with King becoming a Kennedy scholar. Clementi was an athlete, rowing and hurdling and earning a Blue three years in a row. Now he prefers sailing, which should endear him to George, a fellow yachtsman. King prefers tennis, and lists music and European history as interests.

Clementi is a Chelsea fan; King is an avid Aston Villa supporter - he recently turned down an invitation to become a non-executive director of the Birmingham club. George prefers rugby. The rivalry should suit the three, especially if George seeks a new term as governor when his first expires next June.

King's appointment sent a strong message that Brown is prepared to let George carry on. Less clear is whether the Chancellor will give George a full five-year term, taking him to the next election, or renew his contract for a shorter period. Speculation that Gavyn Davies, chief economist at Goldman, Sachs, might be the next governor was dropped when King was offered a deputy governorship. Misgivings about Davies's links with Labour make it difficult for him to jump ahead of King and Clementi directly to the top job.

For King, being offered the deputy post was a sign that he is still on the list for the governor's job, along with Clementi and candidates yet to emerge. King had been passed up twice before, in favour first of Rupert Pennant-Rea and second, Howard Davies. A third miss would have shown that he would never be considered.

With George likely to be around a while yet, Clementi and King have the time to get used to each other. There will be scope for Clementi to adjust to the bureaucratic lifestyle of a central bank. And, indeed, for the Bank to adjust to him.

PROMOTED VIDEO
News
ebookA unique anthology of reporting and analysis of a crucial period of history
Sport
Ray Whelan was arrested earlier this week
Arts and Entertainment
In a minor key: Keira Knightley in the lightweight 'Begin Again'
film
Arts and Entertainment
Celebrated children’s author Allan Ahlberg, best known for Each Peach Pear Plum
books
News
peopleIndian actress known as the 'Grand Old Lady of Bollywood' was 102
News
Wayne’s estate faces a claim for alleged copyright breaches
peopleJohn Wayne's heirs duke it out with university over use of the late film star's nickname
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Account Management Strategy Manager

£38000 - £42000 per annum + competitive: Real Staffing: Required skills:Previo...

Business Analyst Consultant (Financial Services)

£60000 - £75000 per annum: Harrington Starr: Business Analyst Consultant (Fina...

Systems Administrator - Linux / Unix / Windows / TCP/IP / SAN

£60000 per annum: Harrington Starr: A leading provider in investment managemen...

AVS, JVS Openlink Endur Developer

£600 - £700 per day: Harrington Starr: AVS, JVS Openlink Endur Developer JVS, ...

Day In a Page

A History of the First World War in 100 Moments: Peace without magnanimity - the summit in a railway siding that ended the fighting

A History of the First World War in 100 Moments

Peace without magnanimity - the summit in a railway siding that ended the fighting
Scottish independence: How the Commonwealth Games could swing the vote

Scottish independence: How the Commonwealth Games could swing the vote

In the final part of our series, Chris Green arrives in Glasgow - a host city struggling to keep the politics out of its celebration of sport
Out in the cold: A writer spends a night on the streets and hears the stories of the homeless

A writer spends a night on the streets

Rough sleepers - the homeless, the destitute and the drunk - exist in every city. Will Nicoll meets those whose luck has run out
Striking new stations, high-speed links and (whisper it) better services - the UK's railways are entering a new golden age

UK's railways are entering a new golden age

New stations are opening across the country and our railways appear to be entering an era not seen in Britain since the early 1950s
Conchita Wurst becomes a 'bride' on the Paris catwalk - and proves there is life after Eurovision

Conchita becomes a 'bride' on Paris catwalk

Alexander Fury salutes the Eurovision Song Contest winner's latest triumph
Pétanque World Championship in Marseilles hit by

Pétanque 'world cup' hit by death threats

This year's most acrimonious sporting event took place in France, not Brazil. How did pétanque get so passionate?
Whelks are healthy, versatile and sustainable - so why did we stop eating them in the UK?

Why did we stop eating whelks?

Whelks were the Victorian equivalent of the donor kebab and our stocks are abundant. So why do we now export them all to the Far East?
10 best women's sunglasses

In the shade: 10 best women's sunglasses

From luxury bespoke eyewear to fun festival sunnies, we round up the shades to be seen in this summer
Germany vs Argentina World Cup 2014: Lionel Messi? Javier Mascherano is key for Argentina...

World Cup final: Messi? Mascherano is key for Argentina...

No 10 is always centre of attention but Barça team-mate is just as crucial to finalists’ hopes
Siobhan-Marie O’Connor: Swimmer knows she needs Glasgow joy on road to Rio

Siobhan-Marie O’Connor: Swimmer needs Glasgow joy on road to Rio

18-year-old says this month’s Commonwealth Games are a key staging post in her career before time slips away
The true Gaza back-story that the Israelis aren’t telling this week

The true Gaza back-story that the Israelis aren’t telling this week

A future Palestine state will have no borders and be an enclave within Israel, surrounded on all sides by Israeli-held territory, says Robert Fisk
A History of the First World War in 100 Moments: The German people demand an end to the fighting

A History of the First World War in 100 Moments

The German people demand an end to the fighting
New play by Oscar Wilde's grandson reveals what the Irish wit said at his trials

New play reveals what Oscar Wilde said at trials

For a century, what Wilde actually said at his trials was a mystery. But the recent discovery of shorthand notes changed that. Now his grandson Merlin Holland has turned them into a play
Can scientists save the world's sea life from

Can scientists save our sea life?

By the end of the century, the only living things left in our oceans could be plankton and jellyfish. Alex Renton meets the scientists who are trying to turn the tide
Richard III, Trafalgar Studios, review: Martin Freeman gives highly intelligent performance

Richard III review

Martin Freeman’s psychotic monarch is big on mockery but wanting in malice