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The Globe and Mail

Will Libor scandal influence Bank of England governor succession?

Mark Carney, the Governor of The Bank of Canada.


Many were wondering how far-reaching executive resignations at Barclays Bank PLC would be on Tuesday after the company's chief executive officer Robert Diamond stepped down. Mr. Diamond was one of three company leaders to take responsibility for the $455-million (U.S.) penalty slapped on the bank in June by regulators in the U.K. and the U.S. for putting forward false Libor rates.

But what goes rotten at Barclays – it being one of Britain's biggest banks – is bound to have consequences far beyond the walls of the firm's headquarters.

Some industry watchers are speculating that the scandal will make it more difficult for the next Bank of England governor to come from within the City of London – especially if that candidate is close to Barclays.

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The current governor, Mervyn King, is due to retire in June of 2013, which means the selection of his successor will begin a few months from now. But some of the contenders for the top job may have been a little too close to Mr. Diamond for comfort. Up until the Libor fine, Paul Tucker, the deputy governor of financial stability at the Bank of England, was looking like a strong candidate. In fact, on one betting website called, he was ranked the most likely candidate with 4/5 odds. But an e-mail released by Barclays Tuesday indicates that an interpretation of Mr. Tucker's words may have been an instigating factor in the lowering of its Libor rates. Now Mr. Tucker could be called upon to defend his actions and be questioned by a group of MPs.

So who else might be in line for the throne? Well, for one there's the former Barclays group CEO, John Varley, although he was once Mr. Diamond's superior – he's showing 16/1 odds. Another candidate was once chairman of the British Bankers' Association, which is responsible for revealing bank Libor rates. Both these men could be seen as just be a little too close. They may not represent the kind of image, or industry culture correction, that the Bank of England needs to convey.

One non-Brit who may have moved up a peg is Bank of Canada Governor Mark Carney. Back in April it was reported by the Financial Times that the Bank of England was considering Mr. Carney for the role thanks to his stellar reputation, although Mr. Carney himself later denied that this was accurate. "I'm totally focused on my two responsibilities: as Governor of the Bank of Canada, and the Financial Stability Board," he said at the time. He also noted that those two responsibilities more than filled his days.

Not much has been said about Mr. Carney's candidacy since then, and comments are all purely speculative at this point, so it's hard to say how likely a Carney appointment would be. Still, it's interesting to see that despite the protestations of Mr. Carney himself, international speculators have been reluctant to strike him from the list of candidates. And, indeed, may have moved him up. On the betting site his odds are up to 14/1.

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