Mark Carney hailed as 'outstanding' banker


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The Independent Online

Hailed as the “outstanding central banker of his generation”, Mark Carney will be the first non-British citizen to govern the Bank of England in its 319-year history when he takes the helm on Monday.

The Canadian was hand-picked by Chancellor George Osborne to head the Old Lady of Threadneedle Street and becomes the most powerful unelected official in Britain.

The 48-year-old will head an institution now responsible for financial stability and keeping Britain's banks on an even keel - as well as its main task of monetary policy.

Mr Carney arrives from the Bank of Canada, where he is credited with helping the Canadian economy recover faster from the downturn than any other developed major nation.

While Britain struggles to establish growth, Canada has recovered all of the output it lost during its 2008/09 recession, while creating 480,000 more jobs.

In his valedictory speech entitled "Canada works", Mr Carney said Canada was "unique" among leading Western economies when it came to the financial crisis.

"For us, the global financial crisis was an external rather than internal shock," he said.

"When Canadian policymakers responded quickly and forcefully, our financial system channelled credit to where it was needed and our economy adjusted smartly."

It was this track record which prompted Mr Osborne to overlook favourites including Bank veteran Paul Tucker and Adair Turner, the former chairman of City watchdog.

Mr Carney, who will receive an £874,000 pay package - including a £5,000-a-week housing allowance - inherits a venerable institution which has expanded rapidly in recent years.

The Bank's workforce has almost doubled to 3,500 from about 1,800 in 2008.

He has already started shaking up the Bank, recently appointing a senior female banker to the new role of chief operating officer to help "catalyse change".

Charlotte Hogg, the head of retail at Spanish-owned lender Santander UK and the daughter of former Conservative minister Douglas Hogg, will take responsibility for all day-to-day management of the Bank.

Mr Carney will serve a five-year term, and only agreed to take the job after the term was cut from eight years - partly to reduce disruption to his children.

"In my experience, there are limits to these highly rewarding but ultimately punishing jobs," he told MPs when quizzed about his appointment.

The ice hockey fan, born in Fort Smith in the Northwest Territories of Canada, describes himself as someone who knows "how to lead, when to delegate and how to forge consensus".

He studied at Harvard and Oxford universities, and had a 13-year career with Goldman Sachs before becoming deputy governor of Canada's central bank in 2003.

In 2008 he stepped up to governor, just as the financial crisis was erupting.

He takes the reins as Britain's economy emerges slowly from a five-year slump.

Early indications suggest an activist approach to monetary policy, after he urged central banks to ensure "escape velocity" for their economies, suggesting a further boost in quantitative easing (QE).

He told the World Economic Forum's annual meeting in Davos that policy was not yet "maxed out".

He later told Britain's Treasury Select Committee that he favoured flexible inflation targeting - where the rate is allowed to stray from target, as it currently is in the UK - as the "best" policy.

But his arrival comes with financial markets struggling to come to terms with the prospect of central bank support tapering off - especially in the United States - with economic data beginning to show signs of improvement and policymakers anxious about driving up inflation.

A sharp lending squeeze in China in recent weeks has also cast doubt over growth in the world's second biggest economy, causing further ripples of nervousness across global stock markets.

While Threadneedle Street is currently more focused on the holy grail of growth rather than inflation remaining stubbornly above its 2% target, the Bank will be concerned the City does not see it as overly lax in its approach to price rises as it deploys its twin weapons of interest rates and QE to stimulate the economy.

It means that while there is little sign of the Bank rate being increased any time soon from its historic low of 0.5%, there is some resistance on the Monetary Policy Committee (MPC) to lifting QE from its current level of £375 billion.

Howard Archer, UK economist at IHS Global Insight, predicts that while better economic data will relieve pressure on Mr Carney to act imminently on more QE, he is bound to do so in the coming months.

He said: "We suspect that Mark Carney will be keen to try and build up escape velocity from the economy's extended softness and will want to establish his presence."

But whatever the new governor's preference on taking office may be, he is likely to find that, like outgoing governor Sir Mervyn King, he cannot impose his will on the MPC.

In recent months, Sir Mervyn has been consistently outvoted in his aim to boost QE by £25 billion to £400 billion, by a six-three majority on the committee.

Whether Mr Carney - variously described as a "rock star" and the George Clooney of central banking - can sweep away the doubts of fellow policymakers remains to be seen.