November 19, 2012 / 10:56 AM / 5 years ago

UK's Osborne set to play safe, opt for Tucker at BoE

* Osborne expected to announce next governor on Dec. 5

* Deputy governor Tucker most likely to succeed King - poll

* Tucker represents continuity, not big change, at BoE

* Personal chemistry key - former finance minister Lamont

By David Milliken

LONDON, Nov 19 (Reuters) - British finance minister George Osborne is expected to play safe and pick Deputy Governor Paul Tucker as the Bank of England’s new chief, ignoring calls for a more radical option to shake up the central bank.

Earlier this month, three independent reviews into the BoE’s conduct said it suffered from a centralised, hierarchical culture.

This contributed to poor economic forecasting and a slow response at the start of the financial crisis in 2007 -- prompting former policymaker DeAnne Julius to call for “full-scale cultural change” in a Financial Times column published on Monday.

Moreover, from next year the BoE will take charge of British financial regulation, almost doubling its size and boosting the case for a governor with strong management skills and financial market experience, rather than someone in incumbent governor Mervyn King’s academic mould.

But the government has done well out of the current leadership. King backed its austerity programme, and the BoE’s multi-billion bond-buying scheme helped keep the economy afloat.

Tucker isn’t seen as radically departing from this agenda.

Economists polled by Reuters last week saw Tucker as the clear favourite, with 22 out of 23 expecting him to get the job when Osborne announces his decision, probably alongside a major budget statement on Dec. 5. King’s term ends next June.

Vital for Osborne will be selecting someone with whom he can have a strong working relationship at a time when Britain’s economy is struggling to achieve solid growth, almost five years after the start of the financial crisis.

“Personal chemistry matters a lot,” former finance minister Norman Lamont told Reuters.

The case for Tucker, 54, is clear. He has spent his entire career at the BoE, building up a detailed knowledge of both monetary policy and markets. In addition, he is generally well regarded and well connected in London’s banking community, unlike King, who cuts a more distant figure.

“He ticks those boxes,” said Alan Clarke, chief UK economist at Scotiabank, joking that it his only objection was that he did not relish reading more of Tucker’s formidably dense speeches.

Tucker would be likely to disappoint those hoping for a big change in the BoE’s culture and approach to policy.

While he has disagreed with King on some issues, those familiar with the Bank’s workings say they share traits such as an unwillingness to delegate -- something that may prove a problem as the BoE’s responsibilities grow.

Tucker is also known for working all hours, and expecting the same from his staff, with an approach which can tend towards brusqueness on occasion.

“He’s impatient to get things done,” said Stephen Lewis, an economist at Monument Securities who has met Tucker over the years. “I like him personally, but I don’t work with him.”

Another concern is whether further awkward details of Tucker’s closeness to senior bankers might emerge from the ongoing investigations into LIBOR interest rate rigging.


Lewis said he favoured Andy Haldane, the 45-year-old executive director for financial stability at the BoE, who has argued for a more radical approach to split and shrink investment and clearing banks, and to boost competition.

“Paul Tucker is a very clever man. I‘m sure he would do a competent job, but I‘m not sure this is an age where competence is sufficient,” he said.

But Haldane may prove too provocative a choice for Osborne. Last month he addressed a meeting of the Occupy protest meeting and said they had made a “loud and persuasive” case for bank reform. He has called for size limits on what he has dubbed “King Kong” banks.

While there is a chance a dark-horse candidate could emerge, previous front-runners such as Financial Services Authority chairman Adair Turner, and John Vickers, author of a government report on bank reform, are being seen less likely as coming through.

Turner is still mistrusted in parts of the financial sector after he said last year that much banking activity before the crisis was “socially useless”, while the government has watered down some of Vickers’ proposals in impending legislation.

Lamont -- who as finance minister in the early 1990s was an advocate of an independent Bank of England -- said a radical BoE governor was unlikely to be high on Osborne’s agenda.

“You need to have someone whose mind you understand ... and you need to have shared objectives,” he said.

Britain’s economy has been in the doldrums since the 2008-09 recession, and relies on central bank stimulus for support at a time when the government is trying to reduce the budget deficit.

Monument’s Lewis also said Osborne was likely to avoid risks when appointing the next central bank governor who will be hard to influence, with a single, non-renewable eight-year term.

“He could look for economists with more radical views, but why would he want to? He’s been living very comfortably with the Mervyn King regime. Paul Tucker would give him more of the same,” he said.

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