Bank of Canada Governor Mark Carney was unexpectedly named head of the Bank of England as the U.K. government looked abroad for a candidate untainted by financial turmoil to lead the beefed-up central bank.
Carney, a 47-year-old former Goldman Sachs Group Inc. managing director, will become the first foreigner to run the 318-year-old institution as it absorbs new powers to oversee banks. He'll replace Mervyn King from July as policy makers pursue record-low interest rates and asset-buying to propel the economy from its first double-dip recession since the 1970s.
Carney's London posting comes after a series of trading scandals dented the capital's status as the world's leading financial center, leading to a rejig of regulation that will test skills the Canadian gleaned as head of the world's banking watchdog. His chief rival for the job, BOE Deputy Governor Paul Tucker became entangled in the Libor rate-rigging scandal earlier this year.
"It's incredibly bold of the government to appoint a foreigner," said Steven Bell, chief economist at hedge fund GLC Ltd. in London and a former U.K. Treasury official. "He has experience of running the regulatory and monetary policy decisions. He's highly regarded."
In announcing his selection and seeking to offset any criticism about his decision to look overseas for talent, Chancellor of the Exchequer George Osborne described Carney as "quite simply the best, most experienced and most qualified person in the world to do the job."
The pound erased its decline against the dollar after the announcement of the appointment before weakening again. It was at $1.6023 as of 5:50 p.m. in London. Government bonds stayed higher, with the yield on the 10-year gilt at 1.84 percent.
Carney, who holds an economics degree from Harvard and a doctorate from Oxford University, swaps oversight of an economy which bounced back from the global recession without witnessing a single bank bailout for one which slipped back into recession in the second quarter and required multiple bank rescues. The Canadian — who has been Bank of Canada governor since February 2008 — will be paid an annual salary of 624,000 pounds ($1 million) in his new job.
As of Aug. 31, the Bank of Canada's balance sheet was 72.7 billion Canadian dollars ($73 billion). The Bank of England's was 414 billion pounds ($663 billion) on Nov. 21.
"I'm going to where the challenges are greatest," Carney said in Ottawa today. "This is a major challenge, a major opportunity."
The BOE's Monetary Policy Committee has kept its benchmark interest rate at a record-low 0.5 percent since March 2009 and pursued a quantitative-easing program that's grown to 375 billion pounds — even with inflation above its 2 percent target every month since the end of 2009.
Carney, who has previously signaled he wasn't a candidate, defeated bids from contenders including Tucker. The appointment follows the U.K.'s first use of an application process for the position.
Tucker, a three-decade veteran of the Bank of England and the bookmakers' favorite to replace King, earlier this year got engulfed in the scandal surrounding the setting of London Interbank Offered Rate, when Barclays Plc published a memo outlining discussions between him and the bank over high Libor submissions in 2008.
"Most in the City of London had taken for granted that, despite the Libor scandal which may have damaged him more than many thought at the time, Tucker was probably the most likely appointment," Rob Carnell, chief international economist at ING Groep NV in London, said in an e-mail.
Tucker's chances may also have been undermined by his status as a BOE insider. Three reports commissioned by the central bank's governing body and published this month criticized its hierarchical culture.
