There has been much excitement in the media that Mark Carney has this week started his job as the new governor of the Bank of England. High hopes have been expressed for the former Canadian Central Bank head’s time in charge – particularly as Canada appears to have emerged from the global financial crisis in relatively robust health.
Without wishing to pour any cold water on such an upbeat view when the man has barely had time to find his desk, The Value Perspective maintains its view the jury should probably remain out on how much Canada’s fortunes are down to Carney and how much to the enormous natural resources boom the country has enjoyed over the last 10 years or so.
We would also point out that, in common with anyone else – he is after all just one of nine votes on the Bank of England’s monetary policy committee – Carney seems unlikely to be able to materially affect bank policy, let alone the fortunes of a whole economy. That said, as we recently observed in Playing the market, there is scope for central bankers to ‘sinal’ the market through what they say.
In ‘big picture’ terms, the reality is you do not find out if anyone has been a good central banker until about a decade has passed – Judge Carney any sooner and you are basically praising or damning him on the policies he inherited from his predecessor, Sir Mervyn King. More sector specifically, as we have written before, we do believe the next Bank of England governor could be good for UK bank investors.
As we noted in that article, speaking in montreal at the start of November, Carney said: “More intensive and effective supervision will reinforce internal governance and risk management. but the point is not to pile up capital and other regulatory capital requirements so high that banks are never heard from again as either a source of risk or credit to the real economy.”