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The appointment of Andrew Bailey as the next governor of the Bank of England (BoE) should help reassure financial markets and foreign governments that the U.K. government intends to stay the course of reasonable policies, at least on monetary and regulatory matters, when the country leaves the European Union next year.
U.K. Chancellor of the Exchequer Sajid Javid said on Friday that Bailey, 60, a former BoE deputy governor, will take over from current governor Mark Carney in mid-March, after the latter accepted to extend his term for another month and a half.
Bailey’s appointment was hailed as the safe choice of competence over the possible experiments contemplated by the U.K. government during its two-year long recruiting process, such as appointing someone from the private sector or another foreigner to lead the central bank.
Mark Carney was the governor of the Bank of Canada before being appointed as head of the BoE by the government of then prime minister David Cameron in July 2013.
Bailey brings to the job a deep knowledge and experience of financial supervision and banking regulation. An economist by training, he was the BoE’s chief cashier between 2004 and 2011. Between 2012 and 2016, he was deputy governor in charge of prudential regulation, before being appointed as chief executive of the Financial Conduct Authority (FCA), the financial services watchdog.
Bailey’s experience in dealing with financial crises will help him in his new job if a possible hard Brexit hits the U.K. economy hard. Nick Macpherson, a former top UK Treasury official, tweeted on Friday that Bailey was “the most able and competent BoE official [he] worked with: by far the steadiest under fire in the financial crisis. He won’t make waves unnecessarily.”
The new governor will have to deal with the European Central Bank on many regulatory matters as Brexit takes the U.K. further from Europe. As the U.K. financial industry loses its access to EU customers next year, dialogue between the two central banks will play a crucial role in determining how far and how deeply U.K. rules and regulations will diverge from the EU’s.
The role of the FCA, or lack thereof, has been criticized in recent scandals. It was accused of being asleep at the wheel in the collapse of London Capital & Finance, which saw individual investors lose more than £200 million of their savings. The FCA was also seen as too slow to react to the implosion of Neil Woodford’s eponymous equity fund. Several MPs in the previous UK parliament then asked for Bailey’s resignation.
A European central banker noted that Bailey’s experience seems lacking in the intricacies of monetary policy matters. “His appointment seems to be the return to the BoE’s long tradition of having the most senior official take over. He’s not as flamboyant as Carney, and he’s not a top economist.”
The new governor is known neither as a hawk partisan of strict monetary policies, nor as a dove advocating a looser stance. Markets will have to start scrutinizing his statements to try to infer where he might take interest rates in the months and years to come.
