Who is Mark Carney, the Bank of England’s new Governor?

With Mark Carney having been appointed Governor of the Bank of England, many anticipate that his progressive methods will help revive a moribund economy. But he’s not without his critics

Mark Carney, the first non-Briton to hold the position of Governor of the Bank of England 

Mark Carney’s reputation as a leading economist has been earned through the use of enterprising, if sometimes controversial, reform; it was with just such measures that he guided Canada, his home country, through the global financial meltdown. He has rocked the pillars of economics throughout his career, and Carney’s audacious brand of banking – based around the restructuring of fundamental systems – is now set to extend across the Atlantic.

George Osborne’s decision to bring Carney to British shores would appear to be a fairly sagacious one. Since he was appointed to succeed Mervyn King as Governor of the Bank of England, the ‘George Clooney of central banking’ has endured a slew of pay-related clamour, an uncompromising breadth of expectation and, by-and-large, financial industry approval. With a tested head for weathering financial woes, Carney looks a decidedly fair bet for rectifying, at least in part, the calamitous circumstances that have ailed the British economy.

George Osborne, on having appointed Carney, stated that: “He is quite simply the best, most experienced and most qualified person in the world to do the job.” Carney’s coming from abroad, it is hoped, will bring a well-overdue shakeup to an institution that has been undone by its overly insular tendencies. Though he had originally denied any possibility of his taking the position, Carney was announced – in November of 2012 – as the successor to King, and will take up his position in early July.

Carney’s tenure looks to coincide with the Bank of England being granted additional powers through 2013. The bank, this year, will resume the task of both supervising and regulating individual banks, as well as tweaking bank capital requirements and establishing monetary policy to better manage inflation. The measures – termed ‘macro-prudential’ – should be familiar to Carney, as he has chaired the Financial Stability Board (FSB) since 2011.

When asked of the expectations accompanying his appointment to the Bank of England, Carney said that his aims were to get “the full power of that institution focused on the right things, focused on price stability, focused on growth, repairing the financial system and helping to reform the global system and European system.” Regardless of any amendments – beneficial or otherwise – he makes to the UK financial system, Carney will be looked upon by credit agencies as a form of insurance against further meltdown. If nothing else, Carney’s status alone acts as an immediate and considerable protection against any added UK credit downgrades throughout his term.

New vs. old
Carney is inarguably a highly decorated and prestigious financial force, qualities that have already cost his future employers a significant amount of money. Appearing before the cross-party Treasury select committee in February, Carney maintained that his £800,000 annual pay and perks package – including a £250,000 housing allowance – was “equivalent” to that of the acting Governor on a “pay and pension” basis. Seated before a sceptical – though no less adoring – committee, Carney was quizzed on financial lingo such as ‘capital ratio’, ‘unwinding QE’ and ‘liquidity requirements’ in what appeared a preliminary test of his mettle.

Mark Carney, CV


Born, Fort Smith, Northwest Territories, Canada



Doctorate in Economics, Nuffield College, Oxford



Various roles, Goldman Sachs


Deputy Governor, Bank of Canada


Senior Associate Deputy Minister of Finance, Canada Department of Finance


Governor, Bank of Canada


Governor, Bank of England

Carney has seen his pay questioned by the committee and by those in the media still drawing on banking sector’s tainted image. To those unconcerned, unimpressed and unconvinced of Carney’s potential for spurring economic growth, his pay packet is understandably sickening; especially when considering the ongoing two-year pay freeze at the bank. However, the prospects of rectifying UK monetary policy and of significantly reviving the economy are surely of a sufficient enough weight to offset any such concerns of his own monetary worth.

The governor-in-waiting categorically rejected suggestions of his becoming head of a “court of the Sun King” – a reference to Mervyn King’s authoritarian stature – maintaining that current oversight structures would, in that situation, enable him to be made accountable through a number of mechanisms. “I would make the distinction between the responsibilities of the institution, and the power of any individual within that institution,” said Carney. “Part of my responsibility when I am there is that the Bank of England gets additional responsibilities… to ensure that the committee structure, the new governance structure, the other aspects, work to their full effect.”

Carney, before the committee, criticised facets of King’s leadership and accountability, professing that the governor was somewhat narrow-minded in pursuing alternative means of economic growth and that he furthermore discounted external members of the committee in his dealings. Carney said, in relation to these criticisms, that he would look to “ensure that the institution is discharging its responsibilities in the right way, it’s not relying on a single individual – it won’t be – and that accountability is clear and transparent.” Although King has been criticised and labelled as an authoritarian in the past, the bank’s current structure allows for a more open debate than those of the European Central Bank or the Bank of Canada.

Carney and the Bank of Canada
Perhaps the most notable of Carney’s achievements are those relating to his term as Governor of the Bank of Canada and the country’s weathering of the financial crisis during his term. On having begun his tenure in February 2008, Carney imposed strict and unflinching monetary policies to lessen the financial hardships threatening the Canadian economy. Though he was the youngest central bank governor of the G8 and G20 nations at the time, he was charged with offsetting the most damaging period of the financial crisis and did so to an inconceivable degree of success, with Canada outperforming its G7 peers and being the first to have both its GDP and employment figures recover to pre-crisis levels.

Most notable of Carney’s early endeavours, implemented within a month of his appointment, was a decision to cut the overnight rate by 50 base points in March of 2008. Whereas the ECB introduced a rate increase in July 2008, Carney rightly identified the potential for global contagion in the leveraged-loan crisis.

Canada’s nonstandard monetary tool, the ‘conditional commitment’, was a further preventative measure to stabilise inflation rates for at least a year on reaching the effective lower-bound predictions; primarily intended for spurring domestic credit conditions and market confidence respectively. Carney’s decision not to use like-monetary stimuli was integral to the recovery of both output and employment from mid-2009 onwards.

The Bank of Canada’s decisions, under Carney, to substantiate additional liquidity through the financial system and to stabilise interest rates are, to this day, lauded as the integral pillars of Canada’s weathering of the crisis. In 2009, Newsweek wrote of the nation: “[Canada] has done more than survive this financial crisis. The country is positively thriving in it. Canadian banks are well capitalised and poised to take advantage of opportunities that American and European banks cannot seize.”

Inflation targeting
Though Carney is yet to concretely outline his intentions as Governor of the Bank of England, he lauded the five-yearly review process of how inflation-targeting works in Canada, moreover conceding that he had already discussed the matter and its applicability to the UK with the chancellor. He told MPs: “The flexible inflation-targeting framework should remain broadly in place, but details need to be reviewed and could be changed.” Having detailed his plans in over 40 pages of written evidence submitted to the committee, he outlined his views on whether to effectively do away with the current framework: “The bar for change is very high but review and debate can be positive.”

As potential real growth changes over time, either the nominal target will have to change or else it will force an arbitrary change in inflation in the opposite direction

Speaking further on the central bank’s role in determining monetary policy, Carney said: “The benefits of any regime change would have to be weighed carefully not only against the potential risks but also against the effectiveness of other unconventional monetary policy measures under the proven, flexible inflation-targeting framework. Although the bar for change to any flexible inflation-targeting framework should be very high, it seems to me important that the framework for monetary policy rightly set by governments and not by central banks is reviewed and debated periodically.”

Though demonstrating a marked hesitancy in lauding any single system of inflationary targeting, Carney unwaveringly stated that more could be done under the current framework – so termed ‘flexible inflation targeting’ – to better stimulate the moribund economy. “In theory, committing to restore the level of nominal GDP to its pre-crisis trend could raise expected inflation over the short- and medium-term but keep longer-term expectations well anchored. That would reduce real interest rates for a time, providing added stimulus to the economy.” Carney, though, proceeded with a marked degree of caution when it came to his committing to any single method, as he further criticised nominal GDP rates: “It imposes the arbitrary constraint that prices and real activity must move in equal amounts but in opposite directions. As potential real growth changes over time, either the nominal target will have to change or else it will force an arbitrary change in inflation in the opposite direction… Another consideration is that statistics like nominal GDP are subject to revision, and these revisions can be large.”

Carney urged the Bank of England to exercise caution with regards to pursuing a raised inflationary target: “In my view, moving opportunistically to a higher inflation target would risk de-anchoring inflation expectations and destroying the hard-won gains that have come from the entrenchment of price stability. Moreover, if inflation is both higher and more uncertain, a higher inflation risk premium might result, prompting an increase in real rates that would exacerbate unfavourable debt dynamics across public and private borrowers.”

However Carney chooses to review inflationary policy, it’s clear that he’s exercising a degree of caution in his proposal of adjustments to the system, choosing instead to focus on sustaining an adaptable and perceptive overview of its changing mechanisms.

The impact of quantitative easing
The financial veteran has so far demonstrated, as is consistent with the rest of his career, reluctance in pursuing furthered fiscal policies, instead showing a tendency towards monetary policy in restoring economic stability.

As such, Carney, while recognising the past significance of quantitative easing, talked of its relative present and future redundancy in spurring economic growth. “The benefits of large-scale asset purchases, and indeed persistently low interest rates, need to be judged against the potential costs of having a very stimulative policy for a very long time. Such policies can encourage excessive risk taking, distort the functioning of sovereign debt markets, and build vulnerabilities in the financial sector. In addition, central banks need to be mindful of the potential impact of very large purchases on market functioning. The potential costs of QE and the uncertainty about the effect of QE on bank lending behaviour are solid reasons for supplementing QE with the Funding for Lending Scheme.”

Regardless of Carney’s criticisms, the Bank of England has vowed to continue with its emergency policy of QE until the unemployment rate has fallen to 6.5 percent or below, perhaps foreshadowing the conflict that is anticipated to characterise much of Carney’s tenure as governor.

Carney furthermore suggested that central banks have a distinct and integral role in rectifying issues of income inequality and unemployment. Citing the US’s widening gap between the rich and the poor as being far greater than Canada’s under his watch, and warning of a widening wealth gap sowing the seeds of long-term unemployment, he said: “One of the challenges in that environment, which starts with the marked increase in inequality that is the case in the US, is the dangers of persistent unemployment and the gradual loss of skills because of prolonged unemployment, which has severe consequences for the individual but also for the productive capacity of the economy. That is one of the challenges that has been faced by the [US] Federal Reserve and one of the reasons why they have been as appropriately aggressive in their conduct of monetary policy.”

In light of his statements thus far, it can be determined to a degree of certainty that Carney’s intentions for the bank are for it to more adequately oversee and guide a financial system that has been ravaged by out-dated policies and a severe lack of client confidence.

In a climate in which many people remain unconvinced of the core values of financial institutions, Carney hopes to bring back stability to the UK economy with considered, though no less radical, revisions to the system and its levels of transparency.