Who Is on the Shortlist to Lead the Bank of England?
A few months ago, just after Boris Johnson had become Prime Minister, I wrote an article addressing the ongoing selection process for the next Governor of the Bank of England, in which I gave my prediction of who the top 5 most likely candidates might be.
Much has changed in the British political landscape since then, including the decision to hold a general election on 12th December. As a result, Chancellor of the Exchequer Sajid Javid has announced that he will not be making his selection for the next BoE Governor until after the election, to avoid compromising the Bank’s independence by announcing during a “politically sensitive” time.
However, an official shortlist has been delivered to the Treasury, and the 5 names “thought to be” on the shortlist, as reported by the Grauniad, are Andrew Bailey, Minouche Shafik, and Ben Broadbent (who were on my predicted shortlist) as well as Shriti Vadera and Jon Cunliffe (who were not).
I included Vadera as an “honourable mention” in my article, but am admittedly surprised she made it onto the official shortlist, given her reputed “fiery” management style and strong partisan links to the Labour Party. However, bearing in mind the government’s stated intention to make this a diverse hiring process, and their use of the headhunting firm Sapphire Partners which “specialises in diversity and placing women in top roles”, it makes sense that they would have wanted to include her, at least to avoid the shortlist being 80% pale, male, and frail.
Everyone seems to be surprised that former Reserve Bank of India Governor and central banking superstar Raghuram Rajan was not included on the list, having previously been second only to Andrew Bailey in the bookies’ estimations. It’s perfectly true, as has been pointed out, that his failure to be included on the shortlist (or even interviewed) doesn’t necessarily mean he’s out of the race; current Governor Mark Carney was not included in the shortlist to replace Mervyn King in 2013. However, I have long had my doubts about the likelihood of Rajan getting the job, mainly due to the simple fact that (through no fault of his own, mind you) he isn’t British. I imagine this wouldn’t be such an issue in normal circumstances, but current Governor Mark Carney is the first of the Bank’s 120 Governors to have been foreign, and his tenure has been marked by repeated accusations of insufficient familiarity with the British economy. So it’s easy to imagine the pressure that must exist to not give the job to a second full-blown foreigner in a row.
I say “full-blown” foreigner to distinguish Rajan from the person who I personally believe is most likely to get the job, Egyptian-born Nemat “Minouche” Shafik. As I mentioned in my original article, Shafik’s status as a woman of colour would tick all the diversity boxes the government could reasonably hope for, yet she has sufficient “insider status”, both within the British economy and the Bank of England itself, to shield her from the sort of criticism to which Rajan might be subjected, and to be a considerable advantage in its own right. Educated at Oxford and the London School of Economics (two damn fine institutions, in my own entirely unbiased opinion), Shafik is the current Director of the latter institution, and was formerly a Deputy Governor at the Bank of England, having sat on its rate-setting Monetary Policy Committee from mid-2014 to early-2017. During her tenure, Shafik typically voted with the rest of the MPC, making it difficult to isolate her personal views on monetary policy. The only factor I can imagine holding her back would be her reportedly difficult working relationship with current Governor Mark Carney. However, if I were a betting man the research for my original article would have led me to bet on Shafik, and that remains true now that the official shortlist is out.
The only character on the list who I didn’t mention in my original article is Sir Jon Cunliffe, who is currently the Bank’s Deputy Governor for Financial Stability. Cunliffe has held a wide variety of senior civil service positions since 1990, and is currently on the Bank’s Financial Policy and Monetary Policy committees. He was educated at the University of Manchester, with his highest degree being a Master’s in English Literature, which, more than anything else, illustrates Britain’s unique status as a country where you can work in the financial sector with a degree in almost any subject. Cunliffe recently made headlines when he gave a speech arguing that low long-term interest rates put pressure on financial stability, and risk more severe downturns; a potentially welcome sentiment for Austrian ears.
When Mark Carney’s term as Governor comes to an end in late-January, the situation in British politics could potentially be very different: either the Conservatives will win the election and pass Johnson’s EU withdrawal bill, in which case Britain will be out of the EU by February, or Jeremy Corbyn will be Prime Minister, Brexit will be delayed (potentially indefinitely), and this shortlist of candidates might be re-thought or thrown out entirely. For the time being however, this shortlist provides an interesting insight into the priorities and policy goals of Britain’s government and central but doesn’t provide much hope for Austrians.