BOE Governor Race Thrown Into Turmoil by December Election
The early U.K. election in December is creating confusion in the Treasury’s search for a new Bank of England governor.
While the appointment of Mark Carney’s successor has been officially delayed, last week saw a frenzy of speculation about who will get the job. Several reports on the government’s favorites were met on Friday with news that there is no preferred candidate at this time.
The confusion sums up what has thus far been a chaotic appointment process, continually delayed by Brexit. Chancellor Sajid Javid had planned to make an announcement in the autumn.
Now he won’t do so until after the Dec. 12 ballot -- and that’s assuming the current government is re-elected. A new administration, political wrangling in the wake of results, and the proximity to the Christmas and New Year holidays could all mean it’s delayed still further.
“It’s been a bit of a shambolic process,” said Peter Dixon, global equities economist at Commerzbank AG. “It’s starting to look at bit tight.”
After Carney twice extended his term to help steer the economy through Brexit, the search resumed five months ago under then-Chancellor Philip Hammond. A panel of officials held interviews and prepared a shortlist, but that could be discarded.
Leaving it until December could prove particularly problematic given Britain is also set to leave the European Union on Jan. 31. That’s also Carney’s last day -- leaving his successor to deal with the economic consequences of a potentially messy departure with little time to prepare.
It’s also possible that Carney could be asked to extend his term for a third time. In the absence of an announcement, here are some of the people that have been mentioned as potential successors.
The former BOE deputy governor and now director of the London School of Economics is the U.K. government’s favored candidate to take over the top job, according to the BBC. If appointed, she would be first woman to lead the institution in its over three-century history.
Shafik trained as an economist, obtaining a doctorate from Oxford University, and became the youngest vice president in the history of the World Bank at the age of 36. She’s taught at both Georgetown University and the Wharton School of the University of Pennsylvania, and also served as the U.K.’s Permanent Secretary of the Department for International Development.
Another former deputy governor, Tucker, has also also drawing speculation in recent days after ITV’s Political Editor Robert Peston tweeted that he was in the frame. After working at the BOE for over 30 years, Tucker was widely considered front runner to replace Mervyn King in 2013, but was pipped to the post by surprise contender Carney after becoming embroiled in the Libor fixing scandal. Since then he’s been teaching at Harvard and chaired the Systemic Risk Council.
With Brexit taking center stage in the election, Johnson and Javid could opt to mark Britain’s departure by installing a new governor with a more optimistic view of the U.K.’s prospects outside the European Union. This would risk politicizing the central bank though, something Javid may be keen to avoid.
Helena Morrissey, who has dubbed herself a “progressive Brexiteer,” has drawn attention after she last month announced she was stepping down as head of personal investing at Legal & General Investment Management. She has not denied reports that she has been sounded out for the position of governor.
Despite her strengths in management and as a champion of diversity, her appointment would likely to prove controversial given her lack of formal economics training or experience in central banking.
Johnson’s former economic adviser Gerard Lyons has also been mentioned. His views on Brexit, regulation and the BOE’s mandate all differ from the bank’s current stance.
Now an economic strategist at Netwealth Investments, Lyons began his career in the City of London just as Margaret Thatcher was deregulating Britain’s finance industry, and worked as an economist at banks including Standard Chartered. He’s also co-written a book called “Clean Brexit.”
The delay in announcing only increases the case for choosing a BOE insider, as their knowledge of the bank would allow a more seamless handover at a time of economic upheaval.
Of the five people who are thought to have made it onto the shortlist, only Shriti Vadera, chair of Santander U.K. is not a current or former BOE official. According to the Financial Times, she and Shafik are joined by Financial Conduct Authority Chief Executive Officer Andrew Bailey and BOE deputy governors Ben Broadbent and Jon Cunliffe.
Third Time Lucky?
With a possible political upheaval and a tight post-election schedule to name a governor and prepare them for the role ahead of Brexit, the simplest solution might be to ask Carney to stay on in the role.
He has twice already extended his term in order to provide continuity through the Brexit process and has refused to rule out doing so again, although he says the government still has plenty of time and many qualified candidates to choose from.
©2019 Bloomberg L.P.