London's business community is preparing to welcome new Bank of England Governor Mark Carney with open arms, but he faces an uphill struggle and an even more difficult situation than in his current role.
A number of big names in the City of London had lobbied in Carney's favor months ahead of the appointment. The former Goldman Sachs banker was viewed as both competent and a "clean broom" after leading internal candidate Paul Tucker was criticized over the Libor scandal.
Yet Carney's background in banking does not make him an automatic friend to London's financial sector.
The current head of the Bank of Canada has described the Occupy movement as "entirely constructive" and spoken of the need not to return to "business as usual" after the credit crisis.
Hopes that he can kickstart the U.K.'s moribund economy may also be over-optimistic. Within 24 hours of his appointment, U.K. GDP growth for the third quarter was confirmed at 1 percent – but this was inflated by the Olympics and is expected to dip again in the fourth quarter. There was also some bad news for the government's attempts to get the long-term unemployed back into work with Tuesday's announcement that the success rate of a key government program was just 3 percent.
Many of the tools to tackle the crisis, such as lower interest rates and quantitative easing (QE), have already been tried.
Carney is likely to have a more cautious approach to QE than his predecessor, according to Carl Weinberg, chief economist at High Frequency Economics.
Where Carney may be able to make an impact is on key appointments to the Bank of England. The Bank faced sharp criticism from the head of the a U.K. parliamentary committee over "defective governance" earlier this month, and it has been suggested that the Bank was too complacent in its early attempts to deal with the credit crisis.
Carney shook up the Bank of Canada's governance during his term. Three out of the other four members on the bank's governing council have been appointed since he took charge. In the U.K., half of the appointments to the equivalent body are made by the government.
Spencer Dale and Martin Weale's terms on the Bank of England's Monetary Policy Committee – which makes the all-important decisions on interest rates and quantitative easing – are set to leave in May and July next year respectively. Paul Tucker, one of the Bank's Deputy Governors, who was seen as the leading internal rival to Carney, is expected to step down before his term expires at the end of February 2014. Charlie Bean, the other Deputy, will stay on for an extra year, it was announced on Monday.
Carney's stewardship of the Bank of Canada has been very successful to date, but Canada, which is rich in natural resources and didn't allow its banks to take on the leverage seen elsewhere, is a different case to the U.K. or U.S. While credit is contracting in the U.K., it is taking off again in Canada. And five of the U.K.'s biggest banks are facing a potential downgrade by Moody's as concerns about the housing sector and broader economy grow.
"The biggest worry for me (about Carney) is that he didn't learn by doing exactly what the other systems have been going through. You need to be at the sharp end to pick that up. He might come with the sort of complacency central bankers had before the crisis," James Ferguson, head of strategy at Westhouse Securities, told CNBC.
Valentin Marinov, head of European G10 currency strategy at Citi, pointed out several similarities between the two countries, including recent developments in the Canadian housing market and the efforts to bring down inflation.
"Governor Carney seemed determined not to allow the growth in domestic debt to reach excessive levels and highlighted the potentially distorting impact that very easy monetary policy could have on market behavior and price stability," he pointed out.
Carney's appointment reflects the changing landscape of the U.K. in another important way – he's the first foreigner to head the Bank of England. In fact, more than half of births in London are now to mothers who weren't born in the U.K., and the financial services sector is crammed with different accents.
Carney's wife and four daughters are already British citizens, and he plans to take up British citizenship. Before that though, he have to sit an exam on British history and statistics about the country.