By Jennifer Ryan, Simon Kennedy and Kitty Donaldson - 2012-07-03T14:31:35Z
Chancellor of the Exchequer George Osborne’s search for the next Bank of England governor just got even tougher as the Libor-rigging scandal casts a shadow over potential candidates for the job.
Already marred by the worst financial crisis since the Great Depression, bankers and regulators hoping to succeed Mervyn King atop the central bank now face even greater scrutiny after Barclays Plc (BARC), the second-biggest U.K. bank, admitted to falsifying global interest rates.
Paul Tucker, one of King’s deputies and a front-runner to succeed him, was drawn into the Libor furor over his communications with Robert Diamond, who quit today as Barclays chief executive officer. Other possible contenders whose prospects may be affected include John Varley, Diamond’s predecessor, and former HSBC Holdings Plc (HSBA) Chairman Stephen Green, who chaired the British Bankers Association at the time.
“It’s pretty unlikely the next governor will be someone from the City,” said Paul Myners, a former U.K. Treasury minister and now chairman of asset manager Liberty Ermitage Group. “The shortlist just got even shorter as John Varley and Stephen Green fall off it.”
King retires in June and government officials have signalled the formal process for choosing his replacement won’t start until the fall. The search will now be carried out in the wake of a probe by lawmakers into British banking.
[h=2]Libor Probe[/h]Prime Minister David Cameron announced that investigation yesterday after a Financial Services Authority official said that Barclays wasn’t alone in manipulating the London interbank offered rate, and other inquiries are being carried out. The bank was fined $455 million last week in the U.K. and U.S. after it admitted to submitting false Libor rates.
“Depending on what comes out of the Libor inquiry, the government may say that instead of a safe pair of hands, what we want is someone who will shake the industry up,” said Chris Roebuck, a professor at Cass Business School in London.
In one instance at the height of the 2008 financial turmoil, Barclays reported artificially low borrowing costs due to a “misunderstanding or miscommunication” following a telephone call with Tucker, then the central bank’s markets director, the FSA said last week. That conversation prompted Barclays staff to believe “mistakenly that they were operating under an instruction” to do so, it said.
[h=2]Diamond’s Role[/h]The London-based Times newspaper reported yesterday that Diamond participated in the call with Tucker, who has worked at the central bank for more than three decades. Tucker’s role will be scrutinized by the lawmaker panel, Cameron’s spokesman, Steve Field, told reporters yesterday.
“The bank sees everything and it’s inconceivable it didn’t know the Libor recalibration was going on,” said Dan Conaghan, author of the book, “The Bank: Inside the Bank of England.” “Paul Tucker’s star is on the wane and I suspect the government will go for a safer option.”
“As I understand reports of both the FSA and the American regulators, they do not believe Paul Tucker acted with anything less than total propriety,” said Andy Love, a U.K. Labour Party lawmaker who sits on Parliament’s Treasury committee, which scrutinizes the Treasury and central bank. “But if anything should emerge then clearly that will be an influential part of the discussion over who the most appropriate successor to the governorship should be.”
[h=2]Tucker’s Prospects[/h]Tucker’s career at the Bank of England and knowledge of its workings throughout the financial crisis will still weigh in his favor, said Richard Barwell, an economist at Royal Bank of Scotland Group Plc and a former central bank official.
“Someone who was head of a bank in recent years probably didn’t have to spend a lot of time thinking about central bank operations and the things you’d need to know to lead a central bank,” he said.
Other candidates from across the financial services industry may also face scrutiny. Varley was Diamond’s predecessor as Barclays CEO from 2004 to 2010. Green, now a trade minister in Cameron’s government and adviser to Osborne on banking, was then the chairman of the BBA, the lobby group that coordinates Libor.
A spokesman at the Bank of England, where Tucker is deputy governor for financial stability, declined to comment. Varley didn’t immediately respond to messages left for him at the Employers’ Forum on Disability, where is president. A spokesman at U.K. Trade and Investment, the government agency is Green responsible for as trade minister, declined to comment.
[h=2]Lawmaker Probe[/h]“If people are saying Bob Diamond’s the chief executive so he must have known, well this was going on in John Varley’s time so the same applies to him,” said George Mudie, another Labour Party member of Parliament who sits on the Treasury committee. “If that holds together he cannot possibly be appointed” to the BOE.”
Mudie and Love will be among lawmakers who will question Diamond when he testifies to them on the Libor episode tomorrow.
Speculation on potential successors to King has intensified as his retirement date nears. Aside from Tucker, Varley and Green, other names mentioned include former U.K. civil service chief Gus O’Donnell, Bank of Canada Governor Mark Carney, FSA Chairman Adair Turner and Jim O’Neill, chairman of Goldman Sachs Asset Management.
Tucker leads the race at bookmaker Paddy Power Plc, with odds of 4/5. That means a 1-pound ($1.57) winning bet would yield an 80 pence return plus the original stake. O’Neill is second favorite at 7/2, followed by O’Donnell at 4/1 and Turner at 6/1. Green’s odds are 7/1 and Varley stands at 16/1.
[h=2]Sassoon, Rose[/h]Conaghan expects the choice to be James Sassoon, an adviser to Osborne and a former investment banker. Myners suggested John Rose, the former Rolls-Royce Group Plc CEO and now deputy chairman of the Rothschild Group.
The risk of scandal in banking can be problematic when recruiting from finance, said Steven Bell, a former U.K. Treasury official who is now chief economist at hedge fund GLC Ltd. in London. A poll conducted by ComRes this week showed just 10 percent of the U.K. population trust bankers following the financial crisis which began in 2007 and helped push the U.K. into its first double-dip recession since the 1970s.
“There’s always concern in these appointments to make sure the person is squeaky clean,” Bell said.
To contact the reporters on this story: Jennifer Ryan at [email protected]; Simon Kennedy in London at [email protected]; Kitty Donaldson in London at [email protected]
To contact the editor responsible for this story: Craig Stirling at [email protected]
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[h=3]BOE Governor Mervyn King[/h]
Mervyn King, governor of the Bank of England.
Mervyn King, governor of the Bank of England. Photographer: Simon Dawson/Bloomberg
Chancellor of the Exchequer George Osborne’s search for the next Bank of England governor just got even tougher as the Libor-rigging scandal casts a shadow over potential candidates for the job.
Already marred by the worst financial crisis since the Great Depression, bankers and regulators hoping to succeed Mervyn King atop the central bank now face even greater scrutiny after Barclays Plc (BARC), the second-biggest U.K. bank, admitted to falsifying global interest rates.
Paul Tucker, one of King’s deputies and a front-runner to succeed him, was drawn into the Libor furor over his communications with Robert Diamond, who quit today as Barclays chief executive officer. Other possible contenders whose prospects may be affected include John Varley, Diamond’s predecessor, and former HSBC Holdings Plc (HSBA) Chairman Stephen Green, who chaired the British Bankers Association at the time.
“It’s pretty unlikely the next governor will be someone from the City,” said Paul Myners, a former U.K. Treasury minister and now chairman of asset manager Liberty Ermitage Group. “The shortlist just got even shorter as John Varley and Stephen Green fall off it.”
King retires in June and government officials have signalled the formal process for choosing his replacement won’t start until the fall. The search will now be carried out in the wake of a probe by lawmakers into British banking.
[h=2]Libor Probe[/h]Prime Minister David Cameron announced that investigation yesterday after a Financial Services Authority official said that Barclays wasn’t alone in manipulating the London interbank offered rate, and other inquiries are being carried out. The bank was fined $455 million last week in the U.K. and U.S. after it admitted to submitting false Libor rates.
“Depending on what comes out of the Libor inquiry, the government may say that instead of a safe pair of hands, what we want is someone who will shake the industry up,” said Chris Roebuck, a professor at Cass Business School in London.
In one instance at the height of the 2008 financial turmoil, Barclays reported artificially low borrowing costs due to a “misunderstanding or miscommunication” following a telephone call with Tucker, then the central bank’s markets director, the FSA said last week. That conversation prompted Barclays staff to believe “mistakenly that they were operating under an instruction” to do so, it said.
[h=2]Diamond’s Role[/h]The London-based Times newspaper reported yesterday that Diamond participated in the call with Tucker, who has worked at the central bank for more than three decades. Tucker’s role will be scrutinized by the lawmaker panel, Cameron’s spokesman, Steve Field, told reporters yesterday.
“The bank sees everything and it’s inconceivable it didn’t know the Libor recalibration was going on,” said Dan Conaghan, author of the book, “The Bank: Inside the Bank of England.” “Paul Tucker’s star is on the wane and I suspect the government will go for a safer option.”
“As I understand reports of both the FSA and the American regulators, they do not believe Paul Tucker acted with anything less than total propriety,” said Andy Love, a U.K. Labour Party lawmaker who sits on Parliament’s Treasury committee, which scrutinizes the Treasury and central bank. “But if anything should emerge then clearly that will be an influential part of the discussion over who the most appropriate successor to the governorship should be.”
[h=2]Tucker’s Prospects[/h]Tucker’s career at the Bank of England and knowledge of its workings throughout the financial crisis will still weigh in his favor, said Richard Barwell, an economist at Royal Bank of Scotland Group Plc and a former central bank official.
“Someone who was head of a bank in recent years probably didn’t have to spend a lot of time thinking about central bank operations and the things you’d need to know to lead a central bank,” he said.
Other candidates from across the financial services industry may also face scrutiny. Varley was Diamond’s predecessor as Barclays CEO from 2004 to 2010. Green, now a trade minister in Cameron’s government and adviser to Osborne on banking, was then the chairman of the BBA, the lobby group that coordinates Libor.
A spokesman at the Bank of England, where Tucker is deputy governor for financial stability, declined to comment. Varley didn’t immediately respond to messages left for him at the Employers’ Forum on Disability, where is president. A spokesman at U.K. Trade and Investment, the government agency is Green responsible for as trade minister, declined to comment.
[h=2]Lawmaker Probe[/h]“If people are saying Bob Diamond’s the chief executive so he must have known, well this was going on in John Varley’s time so the same applies to him,” said George Mudie, another Labour Party member of Parliament who sits on the Treasury committee. “If that holds together he cannot possibly be appointed” to the BOE.”
Mudie and Love will be among lawmakers who will question Diamond when he testifies to them on the Libor episode tomorrow.
Speculation on potential successors to King has intensified as his retirement date nears. Aside from Tucker, Varley and Green, other names mentioned include former U.K. civil service chief Gus O’Donnell, Bank of Canada Governor Mark Carney, FSA Chairman Adair Turner and Jim O’Neill, chairman of Goldman Sachs Asset Management.
Tucker leads the race at bookmaker Paddy Power Plc, with odds of 4/5. That means a 1-pound ($1.57) winning bet would yield an 80 pence return plus the original stake. O’Neill is second favorite at 7/2, followed by O’Donnell at 4/1 and Turner at 6/1. Green’s odds are 7/1 and Varley stands at 16/1.
[h=2]Sassoon, Rose[/h]Conaghan expects the choice to be James Sassoon, an adviser to Osborne and a former investment banker. Myners suggested John Rose, the former Rolls-Royce Group Plc CEO and now deputy chairman of the Rothschild Group.
The risk of scandal in banking can be problematic when recruiting from finance, said Steven Bell, a former U.K. Treasury official who is now chief economist at hedge fund GLC Ltd. in London. A poll conducted by ComRes this week showed just 10 percent of the U.K. population trust bankers following the financial crisis which began in 2007 and helped push the U.K. into its first double-dip recession since the 1970s.
“There’s always concern in these appointments to make sure the person is squeaky clean,” Bell said.
To contact the reporters on this story: Jennifer Ryan at [email protected]; Simon Kennedy in London at [email protected]; Kitty Donaldson in London at [email protected]
To contact the editor responsible for this story: Craig Stirling at [email protected]
Enlarge image
[h=3]BOE Governor Mervyn King[/h]
Mervyn King, governor of the Bank of England. Photographer: Simon Dawson/Bloomberg