The company hired to find a replacement for departing Bank of Canada Governor Mark Carney is looking for a star external candidate, even as consensus builds around Senior Deputy Governor Tiff Macklem as the front-runner for the job.
Odgers Berndtson LLC, the search firm overseeing the hiring process, has called chief economists from some of the country’s largest banks, asking for names of possible candidates.
“They want to be able to go back to Canadians and say we looked under every nook and cranny,” said Craig Alexander, chief economist at Toronto-Dominion Bank (TD), who said he was called two weeks ago. While “Tiff appears to be the most likely candidate to succeed Governor Carney, at the same time, the government is evaluating all the potential candidates.”
Carney, 47, will step down on June 1, 20 months before his seven-year term expires, to take over the Bank of England a month later, leaving his successor to manage an economy growing at the slowest pace since the global financial crisis.
Jacqueline Foley, a spokeswoman for Odgers Berndtson, said her company doesn’t comment on searches because of confidentiality agreements.
“They were looking for suggestions,” Carlos Leitao, chief economist at Laurentian Bank Securities Inc., said about the call he received, declining to comment further.
While Macklem, 51, has been the near-unanimous choice of economists and analysts asked about the appointment, the previous two selections passed over the senior deputies who had been seen as favorites.
The 12 outside directors on the bank’s board started the job search last month, placing an advertisement in newspapers. In a Jan. 17 statement, Finance Minister Jim Flaherty said he will be directly involved in the selection of Carney’s replacement. The directors and government are looking at a broad pool of candidates beyond internal choices, a person with knowledge of the process told Bloomberg News in January.
Choosing Macklem would represent an endorsement of existing Bank of Canada policy, said Shaun Osborne, chief foreign exchange strategist at TD Securities Inc., which has been to maintain a tightening bias in the face of deteriorating economic conditions, even as central bank policy makers in other Group of Seven countries add stimulus.
“If it is an external candidate, it would, even at the margin, perhaps increase market speculation that the next move is not going to be up,” Osborne said.
The Bank of Canada is the only G-7 central bank to have a bias to raise interest rates. Still, the country’s benchmark rate is the lowest in the Group of 20 nations outside Europe, Japan and the U.S.
Carney “has certainly been pragmatic and quite flexible with his approach to monetary policy,” Osborne said by telephone. “All else being equal, the bank probably would have preferred to have had interest rates a little bit higher than they are right now.”
Canada’s dollar was little changed in the days following Carney’s announcement on Nov. 26 that he would be leaving to take the Bank of England posting. The currency has fallen 3.6 percent against the U.S. since Jan. 23, when Carney said rate increases were “less imminent.”
‘No Radical Changes’
“We don’t expect any radical changes, as in extremely dovish or extremely bearish,” said Aubrey Basdeo, head of Canadian fixed income at BlackRock Canada, a unit of BlackRock Inc., the world’s biggest asset manager. “The market is not sensing that anyone will come in with a very strong bias one way or the other.”
Other potential candidates include Stephen Poloz, chief executive officer at Export Development Canada, Bank of Canada deputy governors Timothy Lane and Agathe Cote, and Jean Boivin, who left the central bank last year to become Flaherty’s adviser on G-20 matters. Bank of Montreal (BMO) Vice Chairman Kevin Lynch, Chris Ragan of McGill University in Montreal and Andrew Spence of the Ontario Municipal Employees Retirement System may also be considered.
“From the set of people I would consider candidates, I think Tiff is the ideal candidate,” said Craig Wright, chief economist at Royal Bank of Canada, referring to Macklem.
The pool of potential candidates is limited because the job requires a unique set of skills, said TD’s Alexander. The ideal candidate would have a background in monetary policy economics, experience at the Bank of Canada or finance department and know “how Ottawa works,” he said.
“One of their challenges is that there is a very finite number of names that are out there as potential candidates,” Alexander says. “The recruitment groups have their work cut out for them.”
Macklem, a Montreal native, was hired by the central bank as an economist in 1984, later getting a doctorate in economics from Western University in London, Ontario. He first joined the rate-setting panel in December 2004 and has been senior deputy since July 2010. Macklem also leads a policy committee at the Financial Stability Board, the Basel, Switzerland-based body led by Carney and charged by the Group of 20 nations with strengthening global financial rules.
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