New deputy could offer clues to post-Carney Bank of Canada

Tue Dec 11, 2012 10:28am EST
 
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By Louise Egan

OTTAWA (Reuters) - The Bank of Canada's pick to fill a vacancy on its rate-setting council could offer clues on the priorities of the well-respected central bank as it gets ready to replace Governor Mark Carney, named last month as the next chief of the Bank of England.

As it seeks to replace outgoing deputy governor Jean Boivin, the bank's hiring committee will weigh the advantages of academic candidates or those with an inside view of central bank operations against those who may have a deeper knowledge of financial markets, an asset Carney brought and which some say propelled him to central banking stardom.

Most Bank of Canada watchers say private sector banking experience is not crucial for a deputy governor job, one of four positions ranking just below the governor and the senior deputy governor. But they acknowledge that the bank may value that skill more highly than it did in the pre-crisis days, when academic credentials were highly prized.

"Having financial market experience won't be and shouldn't be a negative when it comes to considering potential candidates for deputy governor," said Finn Poschmann, vice-president of research at the C.D. Howe Institute, a think tank.

Boivin stepped down in October to take a senior position at the finance ministry. The bank is accepting applications to replace him until January 5.

Unlike the situation in other central banks, where markets quickly peg officials as hawks or doves, depending on their message, the Bank of Canada takes pride in sticking to a single script in public remarks so views from a new appointee may have less weight than in Britain or the United States.

But the appointment of a new deputy may give insight into the bank's agenda for the coming years; whether it boosts its hands-on financial markets expertise or arms itself with a theoretical framework to deal with asset price bubbles and debt.

Two insiders considered strong contenders, Larry Schembri and David Wolf, illustrate the dilemma. Both are advisers to the governing council, but the former hails from academia and the latter is a former market strategist at Banc of America Securities-Merrill Lynch Canada.   Continued...

 
Bank of Canada Governor Mark Carney views some historic gold coins dating back to before World War I, at the Royal Canadian Mint in Ottawa November 28, 2012. REUTERS/Blair Gable