Bank of Canada Governor Stephen Poloz will step down when his term expires next June, setting off a search for a successor who will inherit a central bank that is in good shape, but faces economic and technological challenges.
Mr. Poloz, 64, has held the top position since June, 2013. While the Bank of Canada Act does permit governors to apply for a second term, no governor in the past 40 years has done so.
In a news release on Friday, the bank said an independent committee of its board has begun the search for a successor, and expects to finish by spring. The board’s recommendation would require the federal cabinet’s approval. A new governor will take office on June 3.
“My time as governor has been the most fulfilling of my long career," Mr. Poloz said in a statement. "During my term, the bank has created the conditions for steady economic growth, low unemployment, and inflation close to target through very challenging times.”
The governor not only steers the country’s monetary policy and oversees the smooth operation of the financial system, but also leads an organization with nearly 1,800 employees. The next governor will have to guide the bank through an era of change in digital technology that could significantly reshape Canadian and international financial and payment systems, as well as climate-change issues that may pose new risks to the economy and the markets. The bank also continues to wrestle with the implications of high household debt and a deeply uncertain global trade environment.
Analysts and economists who closely watch the Bank of Canada believe the front-runner to succeed Mr. Poloz is the bank’s senior deputy governor, Carolyn Wilkins. Mr. Poloz appointed her as his second-in-command in 2014, and many believe he has been grooming her to become the bank’s first female governor. Ms. Wilkins is considered strong on the central bank’s key files of monetary policy and financial-system stability, has a deft management touch, and is an effective and comfortable communicator in both official languages.
No senior deputy has been promoted to governor since Gordon Thiessen in 1994. The past three appointees to the governorship came from outside the central bank.
Other potential candidates include Jean Boivin, head of global research for investment firm BlackRock Inc., who was a deputy governor under Mr. Poloz’s predecessor, Mark Carney; Tiff Macklem, Mr. Carney’s senior deputy, who left the central bank in 2014 to become dean of the University of Toronto’s Rotman School of Management; and Paul Rochon, who has been deputy minister of finance in the federal government for the past five years.
“It’s important not to think there’s a list right now," said David Dodge, who was governor from 2001 to 2008. “... There are people who may emerge. The last time around, people wouldn’t have put Steve [Poloz] at the top of the list, either.”
Mr. Poloz was CEO of Export Development Canada when the central bank chose him as governor in 2013, after Mr. Carney resigned to become head of the Bank of England. Mr. Poloz’s more folksy, down-to-earth personality was a contrast with Mr. Carney’s slick, cerebral image, and his tendency toward informal language and colourful metaphors frustrated those who were used to the formality and precision of typical central bankers.
But he has overseen a long expansion of the Canadian economy in which inflation stabilized around the bank’s 2-per-cent policy target, and the bank returned interest rates to more neutral levels from the historic lows left over from the 2008-2009 financial crisis. He has expanded communications with the public, providing increased visibility into policy decisions. And although Mr. Poloz’s quick action to cut interest rates in 2015 in response to the oil market collapse initially took financial markets by surprise, it has been credited with averting a deeper economic downturn and paving the way for a smoother recovery.
“Every [governor] inherits a different seven-year period," Queens University economist Don Drummond said. "... In the scheme of things, Poloz has had a pretty easy go of it. The world was in recovery ... inflation never reared its ugly head over his time period.”
“But in that context, he did very well,” he said.
Mr. Dodge said Mr. Poloz has succeeded in the difficult job of adapting the bank’s economic analysis and forecasting models for the post-financial-crisis period – during which the economic recovery often didn’t act as precrisis experience would have indicated.
“The bank has had to be fairly intellectually inventive,” Mr. Dodge said. “In monetary policy terms, you’d have to judge it as being a very successful period for the central bank.”
The Bank of Canada Act says eligible candidates for the governorship must be Canadian citizens, have “proven financial experience,” and not hold a seat in the Senate, House of Commons or a provincial legislature. The past several governors have had PhDs in economics and substantial senior policy experience, either with the central bank or the federal department of finance.
Some observers have suggested Ms. Wilkins’s lack of a PhD in economics - she received a Masters degree from the University of Western Ontario in 1988 - may be a strike against her. But Mr. Dodge believes the bank will have a hard time finding anyone better suited to the job.
“Someone would have to be pretty good to be judged to be better than the current senior deputy governor.”
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