UPDATE 1-Canada's Flaherty takes active role in search for central bank head

Wed Jan 16, 2013 4:51pm EST

* Finance minister highlights own role in search for chief

* Spokeswoman says interviews by minister not unusual

* No timelines given for decision

By Louise Egan

OTTAWA, Jan 16 (Reuters) - Canada's finance minister will interview candidates for governor of the Bank of Canada, his office said on Wednesday in an unusual announcement that highlights the central role the minister intends to play in the recruitment process.

Mark Carney is stepping down as governor of the Bank of Canada in June to head the Bank of England, and the process of finding his replacement is under way. Tiff Macklem, currently the senior deputy governor, is considered the front runner.

An external recruiting firm, Odgers Berndtson, has advertised the position, and a special committee of the Bank of Canada's board of directors has the task of compiling a list of potential candidates for the job.

The federal cabinet must approve all Bank of Canada governor appointments.

The bank's committee will work in "close consultation" with the finance minister, Jim Flaherty, to review the list of initial candidates, the statement said on Wednesday.

"Once fully vetted, the special committee will then recommend a roster of qualified candidates to the minister for him to interview," the Department of Finance said in a statement without giving a timeline.

It is standard practice for the finance minister to be involved in interviewing and meeting with prospective future governors, but market players don't remember the government ever being this assertive in stating how active it will be in the process.

"Ultimately, the government approves the choice of governor, so I don't see it as unusual for Mr. Flaherty to interview the top candidates," said Doug Porter, deputy chief economist at the Bank of Montreal. "I agree, I don't recall it being broadcast last time, but that may just be a reflection of the now-intense focus on the Bank of Canada more generally," he said.

Carney's appointment to the Bank of England was accompanied by glowing accounts of his role in keeping Canada's economy safe during the global financial crisis.

The Bank of Canada conducts monetary policy independently of the government of the day, but the finance minister has the ultimate authority to overrule the governor in cases of extreme disagreement, a power that has never been used.

Flaherty's spokeswoman, Kathleen Perchaluk, said on Wednesday that the finance minister had interviewed candidates the last time a governor was sought in 2007, when Carney got the job.

There was no official mention of the action at that time.

The central bank's independence came under scrutiny recently after reports that Carney vacationed at the home of a Liberal lawmaker at the same time the opposition party was trying to recruit the central banker to be its new leader.

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