LONDON (Reuters) - Bank of England Deputy Governor Paul Tucker, beaten to the central bank’s top job by Mark Carney, will stand down later this year, giving the Canadian an early chance to help reshape the BoE’s upper echelons.
Tucker, part of the majority of BoE policymakers that opposes further bond buying, had been expected to leave ever since Carney, the former head of Canada’s central bank, was named in November as the surprise choice for governor.
Carney will replace Mervyn King, who retires from the BoE at the end of this month.
But the timing of the announcement took some by surprise - Tucker’s term was due to end next February - and might be a sign that other top policymakers will bring forward their departures, said Tom Vosa, an economist at National Australia Bank.
“The interesting bit will be whether the replacement is an internal or external candidate, which will probably give you some clues as to how Carney expects to position the bank under his governorship.”
Carney will head up a central bank that now has much greater powers, and he is widely expected to start giving markets guidance on monetary policy soon after he takes over.
He has already decided to bring his former chief spokesman from the Bank of Canada with him, in a possible sign he may pursue a more open communications style than King and that more external appointments are in the pipeline.
The decision on who will replace Tucker, who specializes in financial stability, falls to Britain’s finance minister, George Osborne, who is widely expected to consult Carney before picking a candidate.
Barclays economist Simon Hayes said the biggest challenge facing the BoE over the next few years is to ensure monetary policy and regulation of the financial sector are joined up.
“The new deputy governor will be pivotal in this process, and the ability to take the (BoE’s) fledgling Financial Policy Committee forward and to engineer an effective link-up with the Monetary Policy Committee is probably a more important selection criterion than their view on the current monetary stance.”
Tucker is likely to stay on at the BoE for the first months of Carney’s term, which starts on July 1, and the exact date of his departure will be confirmed in due course, the central bank said in a statement.
When Osborne announced Carney’s appointment in November, he said he hoped Tucker would continue to work for the BoE.
But the disappointment of losing out on the governorship was widely seen as too bitter for Tucker, who has been with the bank for more than 30 years.
Tucker, who specializes in financial stability, had been seen as a strong candidate to succeed King.
But his chances took a knock in July last year when the BoE came under fire for failing to act on signs a few years earlier that banks had been rigging the LIBOR interbank interest rate.
Tucker was the BoE’s executive director for markets at that point and was in close contact with Barclays (BARC.L) chief executive Bob Diamond, who later resigned over the scandal.
Tucker came under pressure over his apparently chummy relationship with Diamond.
Diamond said in an email after Tucker was promoted to deputy governor in December 2008: “Congratulations. Well done, man. I am really, really proud of you.” Tucker replied: “Thanks so much Bob. You’ve been an absolute brick through this.”
Alan Clarke, an economist at Scotiabank, said there was a risk that senior BoE staff were demotivated by the appointment of an outsider like Carney and that the bank should be prepared to promote its own staff.
“I think they need to send a signal to bank insiders that there is room for internal promotion. You’ve got brilliant people at the Bank of England being lured away to investment banks,” he said.
Tucker plans to spend a period of time in academia in the United States, the bank said.
The finance minister said in November that Charlie Bean, a fellow BoE rate setter and another deputy governor, would serve an extra year until mid-2014 to help Carney settle in to his new role.
Additional reporting by Li-mei Hoang and Christina Fincher, editing by Hugh Lawson