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Governor of the Bank of England

Volume 738: debated on Tuesday 10 July 2012

Question

Asked by

To ask Her Majesty’s Government, in the light of current concerns over the supervision of financial markets, what qualities are required in the successor to the current Governor of the Bank of England.

My Lords, the Financial Services Bill makes provision to strengthen the UK’s financial regulatory structure. The proposals will establish a new system of focused financial services regulation with the Bank of England at its heart. The current governor still has almost a year of his term to serve. My right honourable friend the Chancellor of the Exchequer has confirmed that the process of appointing a successor will not begin before the autumn. The new governor’s qualities will of course reflect the Bank’s new mandate.

I thank the Minister for his Answer. It is essential that the next governor is a man of unimpeachable integrity, or a woman of unimpeachable integrity—certainly a person who in all jurisdictions will command respect through their understanding of financial markets. Surely they will be required to be a person who has an intimate understanding of markets. The UK’s future problems are likely to have a substantial international context. Does the Minister agree that the next governor must have a character and position that enable him to have a strong, effective relationship with central bank governors in other jurisdictions, particularly the Middle East, China and the United States? If Her Majesty’s Treasury agrees with this, will it ensure that the next governor has these qualities?

First, my Lords, for the clarity of the noble and learned Lord, the Chancellor has said:

“When the time comes, the best person for the job will be appointed, whoever she or he may be”,

so he is very clear on that point. The noble and learned Lord goes on to make an interesting suggestion about one of the possible dimensions of the job, and I listen carefully to what he has to say on that point.

My Lords, under the Financial Services Bill that we have been debating, the new governor would need to be chair of, or to manage, the FPC, the FCA, the PRA and the Court of the Bank of England. That involves, of course, threats to financial stability, the removal or reduction of risks, enhancing the resilience of the financial system, educating the public and, above all, co-operating with the Treasury, which is quite a job as I am not sure it knows what all these things are. Does the Minister think that a man or woman exists who is capable of doing that job, or is he thinking of applying himself?

My Lords, the Bank of England is going to have a very large new mandate, and the points that the noble Lord makes are rather important to this. Whether on the MPC, the FPC or the PRA, the governor is going to be very well supported, not only by deputy governors but by a range of internal and external experts. Just for clarification, the governor no longer chairs the court; that is chaired by a non-executive chairman. I do not know how it was in the noble Lord’s day, but I am sure that co-operation with the Treasury is going to be the least of the new governor’s difficulties.

My Lords, I regret that in the Financial Services Bill we have not established a mechanism whereby Parliament can have a say in confirming the new superwoman or superman to take up this role. Will the Minister at least give us an assurance that the Chancellor will look for someone who breaks away from the mould of groupthink, which contributed so much to the financial crisis in 2008, and who, while having all the necessary financial and economic background, perhaps comes with some other, different experience so that we can burst the bubble that has been a real problem in financial regulation?

To be clear, Parliament will have a role in that the Treasury Committee will, I am sure, hold a pre-commencement hearing if it so wishes. Again, as I said to the noble and learned Lord, I take on board the suggestions that are coming this afternoon.

My Lords, does the Minister agree that the next Governor of the Bank of England, besides having the proven competence that has clearly grabbed the Minister’s attention, should also be a person of honour and integrity—the sort of person who, should he or she wrongly impugn anyone’s integrity, would at least have the grace and courage to stand up, admit it and apologise?

My Lords, if that is an oblique reference to my right honourable friend the Chancellor, I do not believe that an apology is needed. I agree with the noble Lord, Lord Tomlinson, that honour and integrity will be among the qualities needed by a future governor.

My Lords, if we are looking for such a paragon, should not the runner-up in the Canterbury stakes be considered?

My Lords, I am not going to be drawn into a discussion of particular candidates, but the Bishops’ Bench is making some very notable contributions to the deliberations on the Financial Services Bill.

My Lords, Mervyn King has been a very distinguished governor and has made a major contribution to the science and art of inflation targeting, which is internationally recognised. Is it not desirable that in choosing his successor we choose someone not only of absolute integrity with great familiarity of the financial markets, and not just in the British amateur tradition, but someone who is a genuine monetary economist, is internationally respected in the field, and can hold his or her head high and deal on equal terms with Mario Draghi and Ben Bernanke, who are certainly in that category?

My Lords, I am sure that whoever is selected and whoever is recommended by the Chancellor and the Prime Minister to the Queen, whose appointment it is, will be of the very highest quality.