When he takes over next year, the long-time public servant will be charged with guiding the UK economy as Britain forges a new relationship with the EU, its biggest trade partner, and questions will again arise about whether central banks have exhausted their ammunition. The appointment will also reinforce concerns about the 325-year-old institution’s capacity to promote women and diversity within its ranks.
Bailey, the head of the Financial Conduct Authority (FCA), will succeed Canadian-born economist Mark Carney, who reportedly said he was shocked at the “striking” lack of women leaders at the bank when he took his post in 2013. A few days ago, the Financial Times (paywall) reported that Minouche Shafik was on the shortlist to become governor.
The government said in its statement that public appointments are based on merit. Chancellor Sajid Javid said Bailey was “the stand-out candidate” in a competitive field. “He is the right person to lead the Bank as we forge a new future outside the EU and level-up opportunity across the country,” Javid said.
By all accounts, Bailey, a former deputy governor of the Bank of England, has the deep experience that would be expected of a top central banker, and has been tested in crisis, having helped rescue Northern Rock bank when it collapsed during the subprime mortgage crisis. However, the FCA was criticized during his tenure for its handling of a retail bonds scandal and the implosion of funds managed by Neil Woodford, a star stock picker in Britain. Both episodes resulted in substantial losses for small investors.
His appointment will reopen the debate about whether the central bank has the culture and processes in place to promote diversity. Homogeneity can be especially costly when it comes to economic policy, damaging its capacity to serve the public most effectively.
During a speech this summer, Carney said some 17% of senior managers were women when he joined the bank, and that has recently increased to 32%. While the bank set goals for increasing the number of women leaders, Carney came under fire amid turnover (paywall) among top women officials.
One of those women was Shafik, a deputy governor from 2014 to 2017, who left to head the London School of Economics. The Egyptian-born economist had a “difficult relationship” with Carney, according to the Financial Times (paywall), who praised her “invaluable insight” when she left central bank. When she stepped down, Shafik was one of the few women leaders at the Bank of England with a role on a powerful policy committee. All of the central bank’s deputy governors are currently white men.