Decision, decision…in the U.K.

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Thoughts from Jim Trott

Imagine fair reader, that by an extraordinary juxtaposition, I find myself as Chancellor of the UK Exchequer – faced with the decision (because it is my decision to make) who to appoint as the next Governor.  What are my criteria?  I must obviously pick someone who I believe can do the job; someone who will talk with me about the current remit of the Bank, its relevance, and the implications of any changes to that remit; someone who understands the practicalities of adapting the hapless regulatory legacy of the FSA into the Bank ie. somebody who understands the difference between supervision and regulation; and someone who is widely respected in the financial markets. So, I sit back in my chair, ponder for a nanosecond or two, and then appoint the Deputy Governor, Mr Tucker.

But no, perhaps I think a little longer, and then start to ponder what may happen politically to me, should things go wrong for the Bank under Mr Tuckers leadership. Such things are myriad and outside the scope of this little piece, but for examples would be – another bank regulatory catastrophe – let`s call it something unlikely such as miss- selling of Interest Rate Swaps, or more macro, the inability to move positively towards delivering non inflationary growth.  Now if something untoward happens no matter whose fault it might be, I would get the blame for appointing someone who was suddenly not obviously the best man for the job, but someone who was tainted (no matter how unfairly) by close association with the poisonous and wretched `bloody bankers`.  And out of political fear of this comes the appointment of Mr Carney.

I would know, because I would have spoken with many of the high priests of Central Banking, that Mr Carney comes with the full backing of that community, and I would also know that the press would overwhelmingly approve. So, I don’t appoint the man who I am sure can do the job, instead I appoint the man who can very probably do the job, but should things go slightly awry (as things tend to do…) be far more defensible than Mr Tucker. Job done.

Now none of this is to be taken as criticism of me…sorry, I mean the Chancellor. Mr Carney may well be a natural; although I must admit to be a little miffed at the salary demand, and the shortened tenure (both not typical of someone who absolutely wants the job). The wider issue of whether the appointment of a Governor should be a direct political appointment at all, is for a different time…….Hopefully, the financial outlook for the UK will be kinder during the next five years – difficult to be worse than the previous five –  and the Bank of England`s effective working relationships with the banks will be crucial to growth prospects and consumer confidence.

So fair reader, I put it to you that the selection of the new Governor was a carefully weighed, understandable defensive decision.   The Bank has huge challenges ahead and the integration of financial market regulation into its remit is to the forefront. It would be in everyone`s interest if the banks  themselves could be persuaded to face up to making tough decisions about their future shape in such issues as regulatory capital and breaking their structures THEMSELVES – before further dictates are inevitably issued. Personal knowledge of the people concerned, and having both their ear and their respect are very much in the very best traditions of the Bank – it may be a shame to have undervalued such an available and pertinent resource.


Don’t miss Jim at the 2013 Forex Industry Conference in New York City on March 20th,2013. 

Jim Trott (2 Posts)


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