LONDON - The Bank of England is replacing someone who looks like a film star with someone who looks like, well, a bank manager. When Canadian incumbent governor Mark Carney departs in March, his replacement will be Andrew Bailey, the BoE announced on Friday. While the successful candidate looks the best qualified of those who applied, he’s not the safe choice in every sense.

As Breakingviews pointed out back in April, Bailey was always the frontrunner. In a comparison with other candidates he merited top marks for both high-level central bank expertise and macroprudential experience. That was based partly on his current role as chief executive of the consumer-focused Financial Conduct Authority, and partly on prior positions like an effective tenure leading the Prudential Regulation Authority that built up UK bank capital levels after 2008. It makes him a safer bet than current deputy governors Ben Broadbent and Jon Cunliffe, and former deputy governor Minouche Shafik.

Bailey is also arguably a more apt fit for 2019 Britain. When Carney was appointed in 2012, the UK was ruled by a coalition government committed to liberal internationalism, and paying up to secure the services of a global star candidate dovetailed with the BoE’s status as one of an elite cadre of central banks. Since Britain voted to leave the European Union in 2016, Carney has been targeted for alleged bias against Brexit. Bailey’s hitherto relatively neutral stance on Brexit means government relations have a chance of being more harmonious.

However, even Bailey may struggle to avoid confrontation. The BoE’s own analysis suggests the Brexit process will be economically damaging, particularly if Prime Minister Boris Johnson threatens to sever ties abruptly with Europe next year. Bailey will be torn between angering his employer and undermining the integrity of his own staff.

Meanwhile, Bailey’s FCA record is mixed. He was arguably slow to crack down on open-ended trusts and controversial fund manager Neil Woodford. He also proposed watering down UK listing rules to accommodate a potential Saudi Aramco London listing. The latter suggests a reluctance to push back when regulatory and central government interests collide. If Johnson’s government tries to burn regulations to turn London into Singapore-on-Thames, or wants the BoE to help enable big spending plans, Bailey will find himself in a tricky spot.

 

 

CONTEXT NEWS

- Former Bank of England Deputy Governor Andrew Bailey was on Dec. 20 named as the new governor of the Bank of England.

- The BoE said that current Governor Mark Carney had agreed to complete his term which ends on March 15, 2020. Bailey, the current chief executive of the Financial Conduct Authority, will take over the next day.

 

(Editing by Neil Unmack and Oliver Taslic. Graphic by Vincent Flasseur.) ((george.hay@thomsonreuters.com; Reuters Messaging: george.hay.thomsonreuters.com@reuters.net))