MNI INSIGHT: Politics Tilts BOE Governor Hunt To Safer Choice

--Doubts Over How Long Hammond Has Left Clouds BOE Governor Appointment

--BOE Veteran Andrew Bailey Front-runner For Governorship 

By David Robinson

     LONDON (MNI) - The UK's volatile political environment is making the search

for the next governor of the Bank of England more difficult, tilting the scales

towards a seasoned, home-grown appointee with diplomatic skills such as BOE

veteran Andrew Bailey, MNI understands.

     Bailey, who joined the Bank in 1985 and currently heads the Financial

Conduct Authority, is seen as the leading candidate, in part because he has

demonstrated the ability to function well during shifts in regimes.

     Chancellor of the Exchequer Philip Hammond has said he wants to find a

replacement for current Governor Mark Carney by October, and candidates will be

assessed not only according to whether they have the capacity to flourish for a

full term, but also according to whether they will get on with the head of the

Treasury. But there is no certainty that the UK's finance minister, or even the

prime minister, will still be in the job by then.

     A future governor might have to respond to proposals such as those by

Shadow Labour Chancellor John McDonnell and his colleagues in the opposition

Labour Party, including setting the BOE a productivity target. This would be an

anathema to conventional central bank thinking, but any response would have to

avoid the danger of the BOE's becoming embroiled in politics.

     BOE Chief Economist Andy Haldane, himself a candidate for the top job, was

questioned at a hearing of the cross-party Treasury Select Committee about how a

central bank could boost productivity to meet a target. Haldane skirted around

the issue before Carney stepped in and said, bluntly, "we wouldn't have the

tools."

     Haldane is a serious contender to head the BOE. A highly skilled

communicator, hr is spearheading the Bank's development and adoption of

real-time data. He also chairs the newly-formed Industrial Strategy Council -

demonstrating his appeal to the government, He can expect questions, however,

over how we would handle the nuts and bolts of a future financial crisis,

     Another matter to be taken into account in the search would be whether the

revelation of the identity of the new Bank of England head would in itself bring

prestige to the institution or to the government.

     --BREXIT

     This star factor was key to the appointment of Carney, seen as a central

banking luminary when he was lured from the Bank of Canada. But officials fear

that the heightened political atmosphere, which has led to the Bank's being

targeted by Brexit campaigners for supposedly overplaying the negative effects

of the UK's departure from the EU in its projections, has reduced the appeal of

the governorship to similar big-name foreign candidates.

     Among other frequently mentioned candidates, Deputy Governor Jon Cunliffe

has the diplomatic skills, but his lack of an economics background could count

against him.

     Santander chairwoman Shriti Vadera made a name for herself as a key aide to

former Labour Prime Minister Gordon Brown during the global financial crisis and

has a reputation for getting things done.

     But she lacks monetary policy experience and her previous links to Labour

would make her a surprising choice under the current Conservative government.

     Deputy Governor Ben Broadbent is acknowledged to be a formidable economist

and first rate thinker, but his skill set may be deemed too narrow.

     Sharon White, an economist by background, former Treasury high flier and

now chief executive of communications regulator Ofcom, is another name in the

frame. One suggestion was that she could be perfectly placed to be the governor

after next, with time on her side and her career options wide open.

     On past precedent, a committee including the top Treasury official, now

Permanent Secretary Tom Scholar, and Chair of the BOE Court Bradley Fried, will

sift candidates and draw up a short-list likely to be acceptable to the

Chancellor. This time around, an external recruitment agency will also be

involved.

     Hammond acknowledged to reporters last month in Washington that "There may

be some candidates who might be deterred from an application because of the

political debate around Brexit."

--MNI London Bureau; tel: +44 203-586-2223; email: david.robinson@marketnews.com

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