×

Deputy Governor Gieve Quits Bank of England

Bank of England Deputy Governor John Gieve announced on Wednesday he will quit prematurely next year just as the government unveiled the biggest shake-up of the central bank's financial stability remit in more than a decade.

boe_4.jpg

Gieve, who has specific responsibility for keeping the financial system on an even keel, has come under harsh criticism for his part in the authorities' handling of the credit crunch and the collapse of lender Northern Rock.

"Sir John Gieve has decided he will leave the bank next year, once changes to the bank's responsibilities have been made," the BoE said in a statement. "Sir John believes the bank's new responsibilities should be led by a new deputy governor who will serve a full term."

His shock resignation is likely to be seen as a reaction to changes in how the government wants the central bank to be responsible for, and manage, financial stability.

It may also cause some embarrassment for BoE Governor Mervyn King as it follows hot on the heels of a decision by his other deputy, Rachel Lomax, to not pursue a second term.

It is unlikely, however, that Gieve's departure will prompt too many tears elsewhere.

"It's not surprising that he is stepping down because of the deep problems of the last year," the chairman of parliament's influential Treasury Select Committee, John McFall, told Reuters. "It is important that a fresh start is made and financial stability becomes the watchword."

Bad Timing

Gieve's announcement could not have come at a worse time for finance minister Alistair Darling, delivering his first speech to a prestigious annual gathering of City of London bankers -- a speech that outlined sweeping changes to how the BoE will deal with stability.

Both King and Gieve were also at the event.

While King -- not immune himself to criticism at the height of the credit crunch -- welcomed the changes in a speech of his own, they would likely have made uncomfortable listening for Gieve.

They envisage a very different role for the deputy governor with the creation of a Financial Stability Committee chaired by King and accountable to parliament's Treasury Committee.

That panel will consist of outside experts as well as insiders and guide the central bank's management of the financial system.

The BoE is now faced with the task of replacing both deputy governors in the space of a year. BoE Chief Economist Charles Bean is expected to be unveiled as the replacement for Lomax on Thursday.

Policymaker Paul Tucker, who has a remit for markets, may be considered the frontrunner to take Gieve's position.