Last Friday, the British government finally announced the next Bank of England (BOE) Governor after delaying the decision last year because of the general elections and Brexit. Mark Carney who has been heading the central bank since 2013, will be replaced by a BOE veteran, Andrew Bailey.
Chancellor of the Exchequer Sajid Javid made the announcement last week and described him as “the right person to lead the bank as forge a new future outside of the EU and level-up opportunity across the country.”
Just Who Exactly is Andrew Bailey?
He is 60 years old and had worked in the BOE for thirty years. He entered the bank in 1985. During his tenure there, he was appointed as chief cashier which meant that he had his signature in all banknotes.
In 2016, he left the Bank of England in order to head the Financial Conduct Authority (FCA). He has had his fair share of controversy. The FCA has been criticized of its supervision of Equity Income which is Neil Woodford’s flagship fund. Woodford is one of the UK’s most popular fund managers. His fund announced closure in October and there are fears that it may lead to a liquidity crisis that could cost over 15 billion pounds. Bailey has also been criticized for his lack of action on allegations that the Royal Bank of Scotland is making a business out of small businesses instead of helping them.
Bailey to Head the BOE as the UK Goes Through Brexit
When Mark Carney was appointed in 2013, he left the Bank of Canada to head the BOE. The UK economy was faced with a struggling economy and the central bank had just launched a 375 billion pound-quantitative easing program. There was also the threat of a contagion from the euro zone debt crisis.
As for Bailey, the economic landscape is not that different with the British economy clocking in a measly 0.4% growth rate for the third quarter of 2019. The central bank also has a bigger asset purchase program at 425 billion GBP. The biggest challenge for Bailey as the head of the BOE is to support economic growth as the UK goes through its divorce from the European Union. Currently, the central bank has a little more room to maneuver with interest rates at 0.75%. Market analysts think that Bailey will need to get economic growth on the government’s agenda by reviewing the central bank’s monetary policy framework.
The BOE’s Leaking Scandal
Second, one of the more pressing items on Bailey’s agenda is to steer the BOE through a leaking scandal. Last week it was reported that a few traders were given access to a speech by BOE Governor Carney. This then led to them getting financial advantage as they received information about the press conference ahead of its public release. This issue has already been referred to the FCA but it will also be likely one of the key things on his agenda.
Better Forward Guidance with Bailey?
Market analysts are looking forward to how the central bank will communicate the bank’s monetary policy outlook. Mark Carney actually pioneered providing market participants with forward guidance when he headed the Bank of Canada. However, we did not get much of it while he was in the BOE. Andrew Bailey is expected to be more effective in communicating where rates are headed and the views of the members of the monetary policy committee.
BOE to See More Diversity
Lastly, market participants are excited to see if Bailey can bring diversity into the BOE. The oldest central bank in the world is widely seen as hierarchical and key officials are all white men. On the other hand, the FCA is seen to be more diverse with more women in office.
The British pound was little-changed following the announcement. However, Andrew Bailey will likely soon become the most important man for pound traders when he officially takes the position in March 2020.