Analysis: Carney track record hints at Bank of England path

Tue Nov 27, 2012 12:45am EST
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By Jeffrey Hodgson

TORONTO (Reuters) - Britain can expect its next central bank chief to be tough with its banks while being more nimble on monetary policy than his recent hawkish talk might suggest.

Canadian central bank chief Mark Carney, named on Monday as the next governor of the Bank of England, gained a reputation on the global stage by challenging some of the world's most powerful financial executives to make their banks less risky, even if it left them less profitable.

Carney's approach to regulation has been "tough rules with some discretion, as opposed to tough rules with no discretion ... or simply weak rules," said Edwin Truman, Washington-based senior fellow at the Peterson Institute for International Economics.

As head of the Financial Stability Board, set up by the Group of 20 top economies to try to ensure there is no repeat of the global financial crisis, Carney has been a key player in leading the drive for new rules on banks.

Next year the Bank of England will take charge of British financial regulation as well as monetary policy, making Carney a key player in how the City of London is run.

Britain's bankers will not have forgotten his clash last year with the head of JPMorgan Chase & Co.

Jamie Dimon referred to requirements that banks set aside more capital as a buffer against future crises as "cockamamie nonsense," according to one of the attendees at the closed-door meeting.

Carney, who spent 13 years with Goldman Sachs Group Inc, reportedly told Dimon the rule changes are a "reasonable" response to the financial crisis before leaving the room visibly angry.   Continued...

Bank of Canada Governor Mark Carney arrives at a news conference in Ottawa November 26, 2012. REUTERS/Chris Wattie