The man widely credited with steering Canada through the financial crisis and the Great Recession is leaving the country. Now, Mark Carney takes on an even bigger job: repairing a shattered hub of international finance.
Britain’s Chancellor of the Exchequer, George Osborne, shocked the banking world on Monday by announcing in Parliament that Mr. Carney, Canada’s central bank governor since 2008, will assume the same post at the Bank of England next July. The move parachutes the 47-year-old native of Fort Smith, NWT, into one of the most important roles in the global world of finance.
“He is quite simply the best, most experienced and most qualified person in the world to do this job,” Mr. Osborne said.
Mr. Carney quits Canada just as the recovery is stumbling and the central bank and the government juggle not only a deteriorating outlook, but consumers who are in debt and cutting back. His departure leaves the country without the governor who took bold action during the crisis, slashing interest rates to emergency lows. His repeated warnings to consumers to curb borrowing – and his threats to raise interest rates – appear to have slowed the growth of household debt.
“It’s a major opportunity,” Mr. Carney said of the challenge of fixing the world’s seventh-largest economy. “It’s very important for the global economy that the U.K. does well, that it succeeds in the rebalancing of their economy, that the reform of the British financial system is completed.”
Poaching a central banker from another country is unprecedented among G-8 countries.
Mr. Osborne first approached Mr. Carney in February at a meeting of the G20 in Mexico City. For months, rumours swirled that Mr. Carney was a top candidate as Mr. Osborne sought to shake up the London banking establishment by installing an outsider for the first time in the Bank of England’s 318-year history.
But by the summer, Mr. Carney was viewed as out of the running after he stated bluntly on British television in August that he was staying in Canada.
Mr. Osborne would not accept that as the final word.
He stepped up his pursuit of Mr. Carney this fall, after the official deadline for applications had passed. When G20 finance ministers and central bankers met in Mexico City in early November, Mr. Osborne came with an agenda to get Mr. Carney to reconsider. He finally persuaded the former Goldman Sachs banker to consider his offer seriously about two weeks ago.
Mr. Carney met with the Bank of England’s search committee for interviews and emerged as the preferred candidate. He decided to take the job near the end of last week after receiving a number of concessions from his new employers. He will earn a salary plus pension contribution of 624,000 British pounds ($994,160) – more than double the amount paid to current governor Mervyn King and a marked increase from the roughly $500,000 that the Bank of Canada pays its governors. Mr. Carney will also serve a five-year term, rather than the Bank of England’s usual eight, which would coincide with the end of a second, three-year term as head of the Financial Stability Board.
Officials with the Harper government were vague on when Mr. Carney first alerted them of his job offer. They said Mr. Carney’s Bank of England job arrangement was finalized only this past weekend, but declined to say when the Canadian central banker told them he was poised to leave.
“It is our loss, of course it is,” Finance Minister Jim Flaherty said at a joint press conference with Mr. Carney in Ottawa. “His loss will be felt.”
A former Harper government insider said Mr. Carney’s departure is a big loss for the Conservatives. His international stature helped shore up the Tory government’s own credibility on the economy.
“Having Mark there is part of what gave Canadians confidence,” the source said, adding that Mr. Carney’s exit leaves a “big hole with no clear replacement.” Senior deputy governor Tiff Macklem is considered a leading contender, but he’s relatively little known among Canadians.
“Tiff Macklem is a brilliant guy. I presume he will get the job, but he doesn’t give that same sort of confidence that Carney gave,” the former Tory insider said.
To understand Mr. Osborne’s desperation, one need only cast an eye at the state of the British economy, which is on the verge of another recession. Inflation is stubbornly high, and London’s financial district is scarred by scandal and broken financial institutions.
In Mr. Carney, Mr. Osborne saw a candidate with the potential to eclipse Mr. King, a respected member of the central banking fraternity, who is retiring in June.
Mr. Carney is the rarest of monetary policy makers: a PhD economist with real-life experience as an investment banker and exposure to the realities of politics as a senior deputy minister at the Finance Department. Mr. Carney’s reputation is further enhanced by the way Canada weathered the financial crisis, and his emergence as a thought leader at the Group of 20, which last year appointed him to lead the Financial Stability Board, the body that is leading the G20’s overhaul of global banking standards.
Mr. Carney’s term at the Bank of Canada was scheduled to end at the start of 2015, although he would have been eligible for reappointment to an unlimited number of seven-year terms.
“In Mark, you had a very special leader and we’re going to miss him,” Gordon Nixon, chief executive of Royal Bank of Canada, said in Toronto.
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