Surprise Choice for Bank of England Governor

George Osborne took the financial and political worlds by surprise yesterday when he announced his decision for the next Governor of the Bank of England. The two perceived frontrunners were current deputy governor, Paul Tucker and chairman of the Financial Services Authority, Adair Turner. Instead Osborne decided to look outside the UK for his choice, turning instead to the leader of Canada’s central bank, Mark Carney. Although Carney is hardly a household name here, the decision to appoint him was welcomed by much of the political world, including by the Labour Party! In a rare glimpse of unity amongst the parties, Ed Balls, Labour’s shadow Chancellor, greeted the decision to appoint him with warmth saying he is more than qualified for the job.

When Carney took over as Governor of the Bank of Canada in 2008 the world was about to enter the ‘great recession’ in which Canada emerged largely unscathed, an outlier amongst Western nations. The success of Canada was credited to two things, the regulations Canada had placed on its banks before the crisis and the actions of Carney during the crisis. This is why Carney’s appointment was greeted with much happiness. It is also important to note that the Bank of England is being given new powers of regulation to help prevent a repeat of 2008. Carney will be tasked with helping create structural reforms to help the system cope with the massive irregularities in the British financial system.

Carney’s job will be far from easy, Britain’s economy was one of the worst damaged by the recession of the major economies. Our massive dependence on the financial sector helped destroy the economy, if we were in the Eurozone we could be in the position of Greece. Unfortunately we’re haven’t begun repairing, the country has just come out of a double dip recession and could enter into a historic triple dip! Our output is still below what it was in 2008, that’s five years of declining living standards. Carney will have to get banks lending to help stimulate the economy whilst making sure they don’t take stupid risks. We don’t want Casino banking anymore.