King Narrows Tucker Successor Search to Enforce New BOE Policy

By Brian Swint

Jan. 12 (Bloomberg) -- Bank of England Governor Mervyn King, developing new policy tools as the U.K.’s interest rate approaches zero, is narrowing his search for someone to wield them.

King’s hunt for a new chief of markets, the enforcer of monetary policy, will focus on Paul Fisher, the bank’s head of foreign exchange, economists say. Neal Hatch, Andrew Haldane and Andrew Bailey, who are also bank officials, are among other potential successors to Paul Tucker, who becomes Deputy Governor in March. Interviews may start as soon as this week.

The role will be even more pivotal than before as policy makers consider ways to control the economy by buying bonds or other assets. Last week, they cut the benchmark interest rate to 1.5 percent, the lowest since the central bank was founded in 1694. Applications closed on Jan. 9 after King advertised for an official with experience at a “major financial institution” or a central bank in the Group of 10 nations.

“It will be one of the most important appointments King has to make, for sure,” said Amit Kara, an economist at UBS AG in London and a former Bank of England official. “This person will be on the Monetary Policy Committee and in charge of markets. These are important times.”

The bank, in an advertisement in the Economist magazine on Dec. 19, said that candidates for the “high-profile and influential role” should have a “good understanding” of monetary economics and a “strong background” in financial markets, particularly with money and credit.

“Practical experience of treasury management would be desirable,” the ad said.

Job Interviews

Interviews will be conducted in due course, a Bank of England spokesman said. He declined to comment further on the hiring process.

Fisher, 50, currently works under Tucker, 50, in the markets division. He is “a very good macroeconomist who’s done a lot of work on modeling,” Kara said.

“Paul Fisher would be a very obvious and well-qualified candidate,” said Danny Gabay, an economist at Fathom Financial Consulting and a former U.K. central bank official. “He’d be an easy person to slot into the role.”

Hatch, 45, is head of structural economic analysis in the bank’s monetary analysis and statistics division. While Fisher is a “strong candidate,” Hatch would be the best pick, said Colin Ellis, an economist at Daiwa Securities SMBC Europe Ltd. in London and a former Bank of England official.

“He’s a very safe pair of hands,” Ellis said.

Kara named Bailey, 49, and Haldane, 41, as potential applicants. Both are at the same management level as the new position, though they don’t sit on the bank’s nine-member rate setting panel.

Bailey, Haldane

Bailey, whose signature appears on every Bank of England banknote, is executive director in charge of banking services. Haldane, described by Kara as “one of the rising stars” at the bank, has just replaced Nigel Jenkinson as executive director for financial stability this month.

King, 60, said last year that he wants to promote more people to encourage talented staff to build a career at the central bank after a wave of departures during London’s decade- long financial boom. “They are the generation that will run the bank in the future,” he told lawmakers on April 29.

“In normal circumstances, I would expect the bank to make an appointment from within,” said Douglas McWilliams, chief executive officer of the Centre for Economics and Business Research in London. “But the role of the bank may be enhanced and they may well want to recruit someone with external experience.”

Outside Candidates

The position may attract outside candidates as London’s financial-services industry braces for job cuts this year amounting to almost a fifth of its 350,000-strong workforce, McWilliams said. Still, anyone who applies would probably earn “a good deal more” working for a commercial bank that pays annual bonuses, he said.

The bank didn’t disclose the salary on offer in its ad. Tucker earned 173,815 pounds ($264,928) in the 2007 to 2008 financial year, according to the central bank’s most recent annual report.

The successful candidate will have to work closely with Prime Minister Gordon Brown’s government. Both King and Chancellor of the Exchequer Alistair Darling have said that cooperation between the central bank and the Treasury would be crucial to successfully implementing unconventional policies.

If the bank moves to apply so-called quantitative easing, the executive director for markets will provide intelligence to the rate-setting panel on what investors are willing to buy and at what price. The official is also responsible for implementing policy makers’ decisions and will have to help design any new methods of controlling the economy.

“Clearly the markets area would be in charge of putting quantitative easing into practice,” Ellis said. “I would think they’ve got a lot of economists in the bank who are locked in a room thinking about this” and the bank and the Treasury have probably not yet agreed on how it would work, he said.

To contact the reporter on this story: Brian Swint in London at bswint@bloomberg.net.