There's a sense in Britain that Mark Carney, clever chap though he may be, has never been roughed up as Bank of Canada Governor, and may be in for a shock when he lands at the storied Bank of England.
Throughout the financial crisis, Mr. Carney steered a country rare among Western economies.
He did not confront as deep a recession as those in other countries, he did not have to deal with bank failures and bailouts, or high inflation.
Britain was not, and still isn't, as lucky. It may be on the verge of a triple-dip recession. Its banking system almost collapsed and big pieces of it, including the once-mighty Royal Bank of Scotland, were save through nationalization. High inflation has been a stubborn problem.
Mr. Carney will have to deal with this – and more – when he takes over in June at the Old Lady of Threadneedle Street, as Britain's central bank is known.
He will be the first foreign governor in the 318-year history of the Bank of England, and a sign of the change demanded at the institution.
His appointment was heralded not only in Britain, but across the globe, signalling the strong belief that he can perform the governnor's vastly expanded responsibilities better than the other candidates, some of them highly respected. Still, his appointment is a bold, even risky move given the equally vast differences between the Canadian and British jobs.
For Mr. Carney, the issues in Britain are far greater than they have been in Canada, raising questions for a man who, despite his strengths, is seen by some as never having faced such a trial.
"I don't think he has really been tested," ING Financial Markets economist Robert Carnell said in an interview. "The Canadian financial system did not fall apart."
Mr. Carney's surprise appointment Monday – surprise because in August he told the BBC he was not interested in the job – was, for the most part, treated with good grace, even enthusiasm. The fact that he is neither British nor a Bank of England insider did not rile English patriots, probably because London is the world's most international city and Britons are used to foreigners holding positions of vast power.
The list of big-name foreigners includes Rupert Murdoch, the Australian-American media baron who has great influence over almost everything that is read or watched in Britain, and Chelsea Football Club owner Roman Abramovich, a Russian oligarch.
According to the BBC, the British Chambers of Commerce praised Mr. Carney's appointment, noting that his "strong track record as the Canadian central bank governor and extensive experience in international financial regulation mean that he is well positioned to guide Britain through challenging economic times."
Even Ed Balls, the shadow chancellor who normally has no kind words for any decision made by George Osborne, Chancellor of the Exchequer, endorsed Mr. Carney's appointment. He said the government had exercised "good choice, good judgment" in hiring the Canadian.
One warning note came from columnist Ann Pettifor of The Guardian, who said that Mr. Carney's 13 years at Goldman Sachs gives him a pro-bank bias in a country that has no love for the overleveraged banks that almost took down the British economy. "So be very afraid," she wrote. "Business-as-usual will prevail. And nothing will be done to constrain the City [London's financial centre], and therefore to prevent the next collapse of the financial system."
Mr. Carney's appointment was billed as recognition that the British government had to risk an out-of-the-box appointment to deal with the new complexities and problems of British banking regulation, overall financial stability and the go-slow British economy. "He has a very much bigger job here," said Jens Larsen, chief European economist with Royal Bank of Canada's investment arm in London.
Mr. Carney, 47, will not have to go through the financial and banking system hell that Mervyn King, the current Bank of England Governor, went through.
His term, which is to end on June 30, included the 2008 financial collapse, which resulted in the partial or wholesale nationalizations of RBS, Northern Rock and Lloyds banks; a banking-crisis-related credit drought that damaged, and is still damaging, British businesses; a slump that is coming dangerously close to stagflation (the term used to describe the unpleasant combination of inflation and zero or anemic growth); the Libor interest-rate scandal; and calls for the break-up or "ring-fencing" of the universal British banks to ensure that the "casino" businesses, such as trading, do not jeopardize the retail side.
Still, Mr. Carney will inherit messy monetary, economic and banking situations. Mr. King's various rounds of quantitative easing have not worked their magic, suggesting further rounds will make little or no difference. Economic stagnation remains the dominant economic theme despite the growth blip recorded in the third quarter. "It feels like the cupboard is bare in the U.K.," said Mr. Carnell of ING.
With doubts about the effectiveness of quantitative easing, Mr. Carney will have to ensure that the "funding for lending" scheme, introduced by the Bank of England and the U.K. Treasury last summer, produces results. The scheme provides below-market funding to banks in the hope they will boost lending to small- and medium-sized businesses. They may not.
In the meantime, inflation in Britain continues to exceed the Bank of England's 2-per-cent target. At last count, it was running at an annual rate of 2.4 per cent, or double the Canadian rate. Mr. Carney is considered one of the more hawkish of central bank governors. The question is whether his stance is appropriate for the British market.
But his biggest challenge may be his enormous range of responsibilities. If the Bank of England job is unlike his Canadian job, it is also unlike Mr. King's job. Unlike Mr. King, he will be ultimately responsible for the regulation of individual banks (the so-called "microprudential") and the supervision of the banking system as a whole (the "macroprudential"). Among other things, he will have to develop strong opinions on ring-fencing the banks, though ultimately the decision on the banks' future structure would be Mr. Osborne's.
On top of that, toss in monetary policy and learning to deal with the committees, bureaucracy and culture of the old bank.