Osborne Faces Small World of BOE as Governor Choice Looms
George Osborne is about to find out just how many people think they are clever enough to be governor of the Bank of England.
The chancellor of the exchequer will discover today the full list of applicants to replace Mervyn King at the helm of the U.K. central bank, managing monetary policy and banking regulation for a single eight-year term. Candidates have until 8.30 a.m. to express their interest to the Treasury in London.
Bank of England Deputy Governor Paul Tucker, Financial Services Authority Chairman Adair Turner and Independent Commission on Banking Chairman John Vickers are among favorites to succeed King when he steps down in June after a decade in the job. The decision will be announced by the end of 2012.
“It’s going to be a difficult choice to make,” said Grant Lewis, head of research at Daiwa Capital Markets Europe and a former Treasury official. “Every one of the main candidates is adequately qualified. In these circles, it’s a small world. The panel and the candidates know each other. It makes the task of interviewing them harder.”
Goldman Sachs Asset Management Chairman Jim O’Neill said in an e-mail to Bloomberg News today that he had not applied. Former U.K. civil service chief Gus O’Donnell chose not to seek the position, the Financial Times reported, citing an interview.
Reserve Bank of Australia Governor Glenn Stevens hasn’t been approached about the Bank of England role, a spokeswoman said today after the Sunday Times newspaper reported that he is among the contenders.
Candidates were asked to send a resume, a cover letter and a questionnaire disclosing prior political activity and potential conflicts of interest. A panel of officials will draw up a shortlist and notify those who haven’t made it. They will then conduct interviews and make a recommendation to Osborne, with his Liberal Democrat coalition partners also having a say.
The selection panel comprises Treasury Permanent Secretary Nicholas Macpherson, Second Permanent Secretary Tom Scholar and David Lees, chairman of the bank’s court of directors. Lawmakers will also question the new governor before the job commences.
Recent probes over rigging of the London Interbank Offered Rate, which led in June to Barclays Plc being fined a record 290 million pounds ($468 million), have harmed chances of former bankers from applying. John Gieve, a former Bank of England deputy governor, said last month it would be “very difficult” for anyone who has recently worked in banking to get the job.
Tucker, who has spent more than three decades at the central bank, is still a favorite to succeed King, even after his questioning by lawmakers in July over his knowledge of Libor rate-rigging raised concerns about his suitability for the job.
Business Secretary Vince Cable, a Liberal Democrat, said in an interview on Sept. 24 that Tucker’s chances hadn’t been hurt by the Libor probe and that the governor needs to be someone who “understands banking but who isn’t captured by banking.”
“Tucker is the best qualified,” said Shamik Dhar, a former Bank of England economist and head of investment strategy at Aviva Investors, which oversees $409 billion in London. “If this wasn’t a quasi-political appointment, he’d get it.”
The government’s desire to appear committed to reforming the banking industry may favor a candidate with experience of financial regulation, such as Vickers, said Dhar.
Vickers, a professor at Oxford University and a former Bank of England chief economist, was appointed by the government in June 2010 to lead the Independent Commission on Banking, an inquiry designed to promote stability and competition in the U.K. banking industry. The government has pledged to take action on the commission’s findings by 2015.
Appointing Vickers “would scare the banks sufficiently, a way for the government of saying ‘we’re serious about banking reform, but we’re not downright out to get you,’” said Dhar, who worked at the central bank when Vickers was chief economist. “From that perspective, Vickers fits the bill. The question is, does he have the authority to run a large institution?”
Bookmaker William Hill Plc (WMH) has Tucker as favorite at odds of 7-4, according to odds offered last week, meaning a winning 4-pound bet would yield a 7-pound profit. Bank of Canada Governor Mark Carney was at 5-2, Turner was 3-1 and Vickers was 10-1. O’Donnell, who has now said he’s not applying, was at 5-1.
Other candidates cited by William Hill include former policy maker DeAnne Julius and former Treasury Permanent Secretary Terence Burns.
Turner, who steps down as FSA chairman next year when the regulator is split into two agencies, has been the most outspoken critic of banks among the candidates, saying in 2009 that many of the activities carried out by financial-services companies were “socially useless.” In July, he signaled his interest in the job, saying in an interview that he would “obviously not rule myself out.”
O’Donnell had previously indicated he might send in his resume.
“When they do advertise it, I’ll make up my mind whether I want to apply or not,” he said in an interview after he joined Toronto-Dominion Bank (TD) as an adviser in June.
Whoever is appointed will take over a beefed-up institution with new powers over financial regulation to add to its role setting monetary policy. The job of the next governor is “near impossible” and “only superhumans need apply,” Ed Balls, economics spokesman for the opposition Labour Party, has said.
“The new job is a much bigger role, it requires someone who has the authority to walk the corridors of government,” said Steven Bell, a former Treasury official who is now chief economist at hedge fund GLC Ltd. in London. “Gus O’Donnell has very good instincts on monetary policy and is a man of considerable talent. He’d be a great choice.”
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