Carney is a great choice - but he didn’t save Canada

IN hiring Mark Carney, George Osborne has ensured that Britain will stay at the forefront of global financial market regulation. The new governor will be a game-changing counterweight to European banking reform and a man certain to keep the UK’s financial services sector at the centre of its economic recovery.

His chairmanship of the Financial Stability Board and his directorships at the Bank for International Settlements (the central bank for central banks) means Britain will now have the most influential and respected regulator batting for it during what could be the biggest round of legislative and regulatory changes the industry has ever known. Carney will also be able to offer a persuasive challenge and alternative to the EU’s plans to establish control over financial services regulation across Europe.

Having Sir Mervyn King or his Paul Tucker argue for City of London exceptionalism when both were – fairly or not – tainted with the worst excesses of the crisis was not the most effective strategy. Carney’s role as head of the Bank of Canada during the worst of the financial crisis – not a single bank received state aid nor was implicated in any of the myriad financial market scandals – makes him an almost unimpeachable representative of the UK’s interest in EU negotiations.

He’s also a former banker who knows the markets. He is trusted by the major players as a no-nonsense professional who muddied his boots in the same trenches, not someone who lectures them on morality from an ivory tower. He’s also famously unafraid of their judgement, having withstood a furious tirade last year from JP Morgan CEO Jamie Dimon.

But Carney is far from perfect. He’s left behind the largest pile of Canadian personal debt on record and the brewing ingredients of a housing bubble some say could pop at any moment. He’s been criticised for trying to use bank rhetoric to anchor inflation expectations but failing to hike interest rates for fear of inflating the Loonie and blunting the international competitiveness of Canadian exports. Canada’s pristine record for financial market probity owes more to the protective instincts of the Federal government and the province of Ontario, home to the city of Toronto and the country’s biggest banks, than to any form of central bank prescience.

Replicating his success in the UK seems unlikely. Canada’s financial services industry is tiny when compared to the global powerhouse that is London. Its economic insularity during the crisis owed more to the soaring value of commodities and the spillover from the billions in US stimulus spending than to any particular policy decision from Ottawa. Even today, Canada benefits for having its biggest trading partner – the US – growing at a two per cent clip. The UK’s closest export destination, the Eurozone, is sinking into recession.

But without a strong, confident and well-managed City, the UK’s future would be too bleak to contemplate. The simple truth is that the Bank of Canada governor was the best choice available to preserve and strengthen the UK’s key economic asset.

Martin Baccardax is a Canadian journalist and former finance professional. He is the European business editor of the International Business Times at