With Bank of England Governor Mark Carney's term set to end on the final day of January 2020, Britain must pick a successor in the next few months. Unfortunately, this comes at a critical moment for what is still the world’s fifth-largest economy and issuer of the pound sterling, one of the world's four main reserve currencies.
The U.K. finds itself in the unusual position of having top government officials responsible for naming a central bank governor when they won’t even be around to finish the process because British politics has become totally overwhelmed by Brexit. More specifically, Chancellor of the Exchequer Philip Hammond, who manages the recruitment, and Prime Minister Theresa May, who would make the final decision, have initiated the process. However, neither of them will be in office much longer. May resigned her post in early June and the Conservative Party is still in the process of choosing a successor.
The new prime minister is likely to be chosen in the latter half of July, while the Bank of England appointment isn’t due before October. A new prime minister is almost certain to pick a different governor.
Still, dozens of applications for the central bank post were made by the deadline last Wednesday, but a consensus has already formed for the leading candidates.
These include Nemat Shafik, a former deputy governor, who would be the first woman to head the central bank, and Raghuram Rajan, the controversial former governor of the Reserve Bank of India. Andrew Bailey, a former BoE deputy governor who now heads the main financial regulator, is also a top candidate.
But those are all choices putatively favored by Hammond and May; unfortunately each is re-defining the whole concept of lame duck.
May wanted a female governor. Shafik gets additional bonus points for diversity because she was born in Egypt. The Times cited a central bank insider as saying the notice for the post seemed to have been written with her in mind, especially with its emphasis on experience at the International Monetary Fund, where she was one of the top five directors.
Shafik left the Bank of England in 2017, supposedly because she found Carney difficult to work with, and now heads the London School of Economics. She is said to be enjoying her new career in academia, but who could pass up the chance to be governor of the Bank of England?
Rajan left the RBI under somewhat of a cloud, if disagreeing with politicians could be called a cloud. Whether by his choice or not, he wound up back at the University of Chicago where he first taught from 1991-1995. He is probably the most qualified economist in the running, but you have to like the Chicago School of economics for that to be a plus.
If Brexiteer Boris Johnson wins the U.K. leadership contest and becomes prime minister, he may want to appoint his onetime economic adviser, Gerard Lyons, former chief economist at Standard Chartered. On the other hand, he may want to emphasize Britain’s new openness to the world by choosing Shafik or Rajan.
Some central bank officials are also in the running—deputy governors Ben Broadbent, Jon Cunliffe, and Dave Ramsden, as well as chief economist Andy Haldane—but their appointment would be somewhat anticlimactic for a central bank eager to maintain its international standing.
Sharon White, a communications regulator with long experience at Treasury, was considered a candidate but just accepted the job as chair of the John Lewis retailing group. As a black woman, she would have ticked two diversity boxes at once.
Ditto for Shriti Vadera, a former investment banker and cabinet member, who was born in Uganda of Indian parents and currently chairs Santander U.K., and still appears high on lists of possibles. Agostín Carstens, the former central bank chief in Mexico and general manager of the Bank for International Settlements, who was considered one of the front-runners, took himself out of the running at the end of May.