Mark Carney, Governor of the Bank of Canada, is about to start laying down the law as the newly appointed head of the Financial Stability Board
Mark J Carney has a CV that any central banker would die for. Having succeeded to the top job at the Bank of Canada in late October 2007 – that is, just before the financial crisis – he steered it through the turmoil without a single bank failure.
A graduate of Harvard and Oxford, he’s got another three years to run at the Bank of Canada, but earlier this year was short-listed for managing director of the International Monetary Fund before French finance minister Christine Lagarde won it with the help of strong European lobbying.
However, he got a handsome consolation prize when in November 2011 he was named as head of the Financial Stability Board, the global body that’s laying down the law to the ‘too-big-to-fail’ banks. It’s only a part-time job for Carney, but he will have a big hand in shaping the regulatory environment for decades to come.
Last year he was named by Time as one of the world’s most influential people. And although it’s not something he can put on his CV, he’s undeniably handsome; indeed, the George Clooney of central banking. And he’s still only 46.
No wonder Time wrote: “Central bankers aren’t often young, good-looking and charming, but Mark Carney is all three – not to mention wicked smart.”
What Time left out is that Carney, who worked in top jobs for Goldman Sachs, is totally un-intimidated by the heavyweights of the banking world. It was the Canadian who ticked off Jamie Dimon, head of JPMorgan Chase, in a backroom stoush in September last year when the latter complained about an alleged surfeit of regulation. It was also Carney who marched into the lion’s den – the Institute of International Finance, whose membership counts the crème de la crème of private banking – and basically told his audience to stop complaining, because they’d asked for everything they were getting.
For the sake of posterity, his exact words were: “The complete loss of confidence in private finance – your membership – could only be arrested by the provision of comprehensive backstops by the richest economies in the world. With about $4trn in output and almost 28 million jobs lost in the ensuing recession, the case for reform was clear then and remains so today.”
So saying, Carney went on to demolish in his speech every single objection that this august body has raised to the current, on-going comprehensive reform of the global financial sector. Music to the ears of beleaguered taxpayers who have bailed out the banks, he dismissed the “fatalistic” and “world-weary arguments” that insist any regulation will be arbitraged (exploited in some way), that the deposit insurance that most western banks enjoy must inevitably promote risk-taking, and that financial crises are inevitable.
Clearly, his part-time job is the one that will give Canada’s “rock star” banker – another epithet routinely awarded to Carney – the most influence. And here he’s on a mission. The Financial Stability Board is the first global regulator, and its job is to make sure the reforms thrashed out by the G20 are implemented in letter and spirit. His target includes not just mainstream banks but the shadow banking sector, which he considers extremely dangerous because it sits outside the pale.
In this task, he warned his audience, it has an important role: “Belief by the industry in the appropriateness of the measures will also aid their application. As you are well aware, you have the ultimate duty to ensure your institutions bear responsibility for the risks you are taking.”
If that’s not telling them, nothing is.
Carney has his critics. After all, it’s not as though he single-handedly saved Canada from the banking failures that hit Britain, Europe and USA. He inherited a famously responsible financial sector and a much-respected central bank. And some banking pundits rebuke him for insisting that banks should be allowed to fail while supporting them behind the scenes (in the crisis the Bank of Canada tripled its balance sheet to maintain liquidity in the sector).
But for anybody wanting a global view on just about everything related to systemic risk, he’s the first port of call. As Time says, “wicked smart.”