Next BOE Chief Must Be Independent of Banks, Cable Says

U.K. Business Secretary Vince Cable
U.K. Business Secretary Vince Cable. Photographer: Simon Dawson/Bloomberg

U.K. Deputy Prime Minister Nick Clegg and Business Secretary Vince Cable called for the next Bank of England governor to be independent of the banking system, with Cable hinting no bankers had applied for the job.

“Clearly you want someone who understands banking but is not captured by banking,” Clegg said in an interview with Bloomberg Television yesterday at his Liberal Democrat party’s conference in Brighton. The person needs to have “a suppleness of mind, capable of challenging orthodoxies at a time when many, many orthodoxies on how you run monetary and fiscal policy are being challenged by the very exceptional circumstances that we face,” he added.

Conservative Chancellor of the Exchequer George Osborne this month formally began his search to replace Mervyn King, who steps down in June. Osborne’s Liberal Democrat coalition partners will have a say in the appointment, which will be announced by the end of this year.

In an interview yesterday, Cable said King’s successor must be someone “understanding the banking system but independent of it and able to speak frankly where necessary.” Asked if a banker could do the job, he said: “I don’t know that there are any applying.”

Former Bank of England Deputy Governor John Gieve said on Sept. 12 that it would be “very difficult” for the government to select a banker who had worked recently in light of recent scandals tarnishing London’s financial center.

Cable said that the chances of Deputy Governor Paul Tucker -- currently one of the favorites to replace King -- haven’t been hurt by recent questioning on the extent of his knowledge of the rigging of interbank rates by Barclays Plc.

No ‘Detriment’

“I’m not saying I prefer him or prefer anybody else, but I didn’t see anything in the recent comments which reflected to his detriment,” Cable said.

Other prospective candidates include Financial Services Authority Chairman Adair Turner and the former head of the U.K. civil service, Gus O’Donnell, who was once on the same soccer team as Cable when they both taught economics at Glasgow University.

The business secretary said King had done a good job in difficult circumstances.

“I’m not one of his critics, I have a lot of respect for him,” Cable said. “He’s been a very helpful influence, going beyond monetary policy in the narrow sense.”

King’s comments last week that it might be acceptable for the government to miss its debt-reduction targets show confidence in the fiscal plan, Cable said.

‘Helpful’ Remarks

“It’s helpful,” Cable said. “What he’s actually saying is that from the point of view of the governor of the central bank, it’s important to have confidence that the government has basic fiscal discipline and that we’re sticking to our deficit-reduction plans.”

The uncertain economic outlook has prompted speculation that Osborne will miss one of the two pillars of the government’s fiscal policy -- a commitment to see net debt fall as a share of the economy from 2015. King told Channel 4 television on Sept. 20 that it would be acceptable to miss the target “because the economy’s grown slowly” as that “was always part of the plan.”

“As long as we’re seen to be credible in that area, it has the confidence of our lenders and it has the confidence of the central bank,” Cable said. “The central bank is crucial, because we rely on them to provide much of the stimulus, through monetary policy, either orthodox or unorthodox.”

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