The field of candidates for the next governor of the Bank of England narrowed on Thursday as Andrew Bailey emerged as the firm favourite.
Mr Bailey, who runs the Financial Conduct Authority, is a former deputy governor of the bank and has long been seen as a highly qualified domestic candidate. However, his chances appeared to have been dented by a series of financial scandals in the past year where questions were raised over the effectiveness of the FCA as a regulator.
Mr Bailey would take over from Mark Carney, the Canadian incumbent, at the start of February becoming the 121st governor of Britain’s central bank. He would inherit a central bank in testing economic times with monetary policy close to the limits of its effectiveness and the new government seeking to boost the economy with a massive expansion of infrastructure spending.
According to friends of Minouche Shafik, director of the London School of Economics, she learnt this week that she was no longer in contention for the post. Shriti Vadera, chair of Santander UK and an aide to prime minister Gordon Brown during the financial crisis, understood for some time she was out of the running.
The dark horse candidate, Kevin Warsh, a former member of the US Federal Reserve’s board of governors, had also been ruled out, according to another person close to the selection process. Mr Warsh is a friend of George Osborne, the former chancellor, who stunned the financial world in 2012 when he appointed Mr Carney to the BoE.
The appointment of the next governor has been a protracted process overshadowed by Brexit and the change of leadership of the Conservative Party and a new chancellor in Sajid Javid.
Mr Javid is preparing to announce the new governor, with the news expected on Friday.
Sources close to the appointment process said that Gerard Lyons, previously Boris Johnson’s economic adviser as London mayor, had not performed well in interview and had been deemed not to meet the requirements of the job description.
But, as a crown appointment made by the queen on the advice of the prime minister, Mr Lyons was still viewed as having an outside chance of the top job.
Ben Broadbent and Jon Cunliffe, the two deputy governors, were still hopeful that they might be in line for a promotion.
Sources close to Mr Javid indicated that the potential candidates had been vetted on the basis of past statements and whether they were compatible with the directions of the new government in a job where the BoE and government have to work in alignment on many issues.
Ms Shafik was rejected by Mr Johnson because of her critical views on Brexit. Candidates’ positions on the issue were a key factor in the process.
The successful candidate does not need to be approved by MPs on the Treasury select committee, but Mr Javid has reassured the committee that any appointment will be made in time to ensure they would be able to hold a hearing with the appointed person before the new term of office is set to start in February 2020.