Treasury chief Sajid Javid, who announced the appointment Friday, said Bailey was the “stand-out candidate in a competitive field” to replace Canadian Mark Carney. By the time Carney leaves on March 15, he will have been at the helm for nearly seven action-packed years.
Javid said Bailey, a deputy governor under Carney for three years until 2016, “is the right person to lead the bank as we forge a new future outside the EU and level up opportunity across the country.”
Prime Minister Boris Johnson approved Javid's recommendation and Queen Elizabeth II has given her formal approval. Bailey will serve an eight-year term and there's little doubt that the Bank of England, already an enormously powerful institution within Britain, will play a key role in the country's first years outside the EU.
Following last week's big win for Boris Johnson's Conservative Party in the general election, Britain is due to leave the EU on Jan. 31 and then enter a transition period until the end of 2020. During that time, Britain will be in the EU's economic arrangements but without a vote as the government seeks to negotiate a new trading relationship with the bloc. As a result, the Brexit uncertainty that marked Carney's time at the bank will remain for Bailey.
Replacing Carney, the first non-Briton to take the top job at the 325-year-old institution, has been a protracted affair because of Brexit uncertainty and the election. To ensure a smooth transition, Carney has agreed to extend his time at the helm from Jan. 31 for six weeks.
Bailey left the bank in July 2016 to become chief executive at the Financial Conduct Authority. Bailey's star was thought to have waned largely because of a few recent financial scandals, notably the collapse of investment funds run by Neil Woodford that raised questions over the FCA's ability to regulate risky funds.
However, he remains well-respected across government and the financial community, largely because of his work during the global financial crisis a decade ago when he helped resolve a series of problems within the British banking sector. He played a key role in the state bailout of Lloyds Bank and Royal Bank of Scotland.
Nick Macpherson, who was the top civil servant at the Treasury during those bailouts, said in a tweet that Bailey was “the most able and competent” Bank of England official he worked with: “By far the steadiest under fire in the financial crisis. He won't make waves unnecessarily. But his all round experience will help to steady economic policy at a challenging time for the U.K.”
Bailey, 60, said it was a “tremendous” honor to be chosen as governor “particularly at such a critical time for the nation as we leave the European Union.” For his part, Carney said Bailey “brings unparalleled experience” and praised him for his role during the financial crisis.
“Andrew is widely and deeply respected for his leadership managing the financial crisis, developing the new regulatory frameworks, and supporting financial innovation to better serve U.K. households and businesses,” he said.
Bailey will have a lot to ponder as he prepares to take up his new job, beyond Brexit's impact on the British economy. Like other major central banks around the world, the Bank of England has over the past decade enacted a massive monetary stimulus and slashed interest rates - currently at 0.75% - in response to the financial crisis.
“As in other countries, the extent of monetary stimulus in the U.K. is extraordinary by historical standards,” said Dr. Garry Young, Director of Macroeconomic Modelling and Forecasting at the National Institute of Economic and Social Research. “This has blurred the boundary between monetary and fiscal policy and raised questions about how policy should respond if the economy turns down again.”