Deputy Bank of England governor Minouche Shafik to leave central bank after just two years

Deputy governor for markets and banking is to take up ‘dream job’ as director of the London School of Economics

Ben Chu
Economics Editor
Monday 12 September 2016 10:55
Dr Shafik chaired the Fair and Effective Markets Review after the libor-rigging scandal
Dr Shafik chaired the Fair and Effective Markets Review after the libor-rigging scandal

Dr Nemat “Minouche” Shafik, a deputy governor of the Bank of England, is leaving the central bank just two years into her five-year term in order to become director of the London School of Economics.

Dr Shafik, 54, is deputy governor for markets and banking and was appointed in August 2014. She sits on both of the Bank’s key policy-making forums, the interest rate-setting Monetary Policy Committee and the Financial Policy Committee which sets limits on banks’ lending and leverage.

She will leave the Bank in February 2017 but will be subject to a six-month “cooling-off period” before she can take up her position at the LSE.

The departure of a key Bank official after such an abbreviated period is likely to raise eyebrows, although people with knowledge of the situation said there was no indication Dr Shafik was unhappy at the Bank and said she regarded the LSE post as her “dream job”, which was too good to turn down.

Before joining the Bank of England Dr Shafik served in senior roles at the International Monetary Fund, the Department for International Development and the World Bank. She completed an MSc at the LSE after her undergraduate studies at the University of Massachusetts-Amherst.

The Treasury will begin the search for her successor “in due course” and it is expected that her position will not be abolished. There will be pressure on the Bank of England to appoint another woman to the role amid a sense that women are still underrepresented in the most senior roles at the Bank. Dr Shafik is the only female deputy governor. The other three deputy governors are Ben Broadbent, whose brief covers monetary policy, Sir Jon Cunliffe, who covers financial stability and Sam Woods, the head of the Prudential Regulation Authority.

Some outsiders had speculated that Dr Shafik’s markets oversight role could overlap awkwardly with financial stability and regulation, leading to tensions.

The Bank’s Governor, Mark Carney, said: “We will say farewell to Minouche with gratitude and regret. She helped drive vital reforms on the domestic and international stages, perhaps most prominently in the successful completion of the Fair and Effective Markets Review which she co-chaired”.

Dr Shafik said: “It has been such a privilege to work with colleagues at the Bank of England… While it was impossible to resist the opportunity to lead a world-class university like the LSE, I leave the Bank with a deep appreciation for its work and much admiration of its staff.”

One of Dr Shafik’s main responsibilities upon joining the Bank was to help clean up financial markets in the wake of the interest rate and foreign exchange rate-rigging scandals. The final report of the Fair and Effective Markets Review, known as FEMA, was delivered in 2015.

On monetary policy Dr Shafik did not dissent from the majority position. Most recently she voted last month to cut interest rates to a new record low of 0.25 per cent and to extend quantitative easing by £70bn to cushion the economy from the shock of the Brexit vote.

Howard Davies, another former Bank of England governor, ran the LSE for eight years until 2011 when he resigned over the university’s acceptance of donations from the Gaddafi family in Libya and cultivation of close ties with the regime. Mr Davies has subsequently been appointed chair of the majority state-owned Royal Bank of Scotland.

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