Fears of delay to naming Clementi successor

The Government may delay the announcement of a new deputy governor at the Bank of England in a move that will cause dismay in the City of London.

The Chancellor, Gordon Brown, had been expected to unveil the replacement for David Clementi, who retires next week, over the next few days.

The decision will also determine who fills the vacant seat on the Bank's Monetary Policy Committee that sets interest rates.

But a Treasury spokesman said: "We are not sure if it will be this week, it's still in the balance. We have to dot the i's and cross the t's."

As well as setting interest rates, Mr Clementi has responsibility at the Bank for financial stability and a key role at the Financial Services Authority.

The Chancellor has been criticised for leaving the announcement of the decision so close to Mr Clementi's retirement from the Bank.

John Butler, UK economist at HSBC, said the delay suggested Mr Clementi's decision not to seek an extension to his term had come as a surprise to the Government.

"It is a key role and while there are fears of financial instability it is a role we would like someone to fill during this period," he said.

"In an ideal world there would have been a continuum with Mr Clementi rather than with someone coming in and starting afresh."

City economists are hoping the new appointee will join in time to vote on interest rates at the MPC's meeting on 5 and 6 September.

The City was disappointed the MPC met in June with only eight of its normal nine members because Marian Bell, Sushil Wadhwani's replacement, could not join until July.

Mr Clementi's replacement is expected to come from within the City banking community or from inside the Bank of England's financial stability unit.

Speculation has focused on a shortlist of possible candidates. Michael Foot, who is currently a senior director at the FSA, was head of supervision at the Bank.

However it is understood that Sir Howard Davies, the FSA's chairman, is keen to prevent the Treasury poaching Mr Foot.

The leading internal candidate is Alastair Clark, executive director for financial stability at the Bank. However analysts said the delay probably meant the Government was looking for someone with a similar City background to Mr Clementi, who was the chief executive of Kleinwort Benson before joining the Old Lady.

The leading City candidate is David Verey, who stunned the Square Mile two weeks ago by quitting his job as number two at Cazenove, which he took on after spending a quarter of a century at Lazards.