New BoE chief Carney to be tough as King

Bank of EnglandMark Carney, newly appointed as the next governor of the Bank of England (BoE), will continue to be tough on banks like his predecessor Mervyn King, it is expected.

Rupert Watson, head of asset allocation at Skandia, says a new face at the central bank may help improve the relationship between banks and their new regulator, the Prudential Regulation Authority, which comes into force next year and will be part of the BoE.

“Carney is expected to be tough with the banks, although no tougher than Mervyn King, who clearly felt no love for these institutions,” Watson says.

However, Watson adds it is difficult to know whether Carney will be a hawk or a dove because the Bank of Canada – where he is the current head – does not produce minutes.

“While the Bank of Canada has been less aggressive than the Bank of England or the Fed, this is largely because the Canadian economy has not been as badly damaged as either the UK or the US,” he says.

“However, it would be a surprise if Carney was an outlier in terms of Bank of England thinking. He is a highly credible, if somewhat surprising, choice.”

The UK government announced Carney’s appointment on Monday and he takes up his appointment from June 2013.

One of his challenges may be to unwind the quantitative easing (QE) programme. Carney will also have to deal with the split of investment banking from retail banking, and solve the Libor scandal.

Andrew Morris, managing director at Signature, a UK wealth manager, says: “During his tenure, QE may need to start to be reversed and the appointment of a proven central banker with a wealth of experience and a fresh perspective will best position the Bank of England, and indeed the country, for this challenge.”

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