UK shakes up Bank of England with three new top policy appointments

Reuters

* UK unveils big shake-up of top Bank of England officials

* IMF's Shafik named as new deputy governor for markets

* MPC's Broadbent to be deputy governor for monetary policy

* BoE's Haldane replaces Dale as chief economist

* Markets director Fisher to lose seat on MPC

By David Milliken and William Schomberg

LONDON, March 18 (Reuters) - Britain shook up the Bank of England on Tuesday, breaking the all-male grip at the top as it appointed two new deputy governors and a chief economist who has been highly critical of the banking industry.

The biggest single change in senior staff since the BoE gained independence in 1997 is accompanied by changes lower down which Bank of England Governor Mark Carney said were essential to wean the bank from its previous almost-exclusive focus on targeting inflation.

"With time, a healthy focus became a dangerous distraction," he said in a lecture in London's financial district. "The reductionist vision of a central bank's role that was adopted around the world was fatally flawed."

Carney also said the central bank needed to be more coordinated to manage "great risks" in the global economy, noting super-low interest could lead to complacency in financial markets.

The most striking of Tuesday's changes is that International Monetary Fund official Nemat Shafik becomes deputy governor for markets and banking - the first woman in a top policy role since 2010.

Ben Broadbent, until now an external member of the Bank's Monetary Policy Committee, will step up to become deputy governor for monetary policy.

In a third move, executive director for financial stability Andy Haldane swaps jobs with chief economist Spencer Dale.

Dale had been a favourite to become deputy governor but will lose his MPC seat from June when he takes over Haldane's role on the Financial Policy Committee, which regulates banks.

Haldane has been unusually outspoken for a central banker, criticising banks for trying to dodge regulation and addressing anti-capitalism protesters.

The changes - made by Carney and the government - are part of an overhaul to break down barriers between the Bank's monetary policy and bank regulation wings after the BoE was given major new supervisory powers in April.

Markets director Paul Fisher will lose his MPC seat to Shafik from Aug. 1, and will move to the bank's regulation arm. Fisher has been under fire from lawmakers over the BoE's handling of alleged manipulation of London's currency market.

When asked by a reporter if there was a connection, Carney said the shake-up predated the foreign exchange scandal.

"The Bank needed a pretty major shake-up and it is certainly getting one," said Jonathan Portes, director of Britain's National Institute for Economic and Social Research.

Portes said the new appointments should breathe fresh life into the central bank's macroeconomics team - which had a patchy forecasting record and was too inward-looking - and that Shafik had the right temperament to tackle market abuse.

"She's pretty tough and at the moment you need someone who is prepared to be fairly tough with the London financial sector," he said.

But Domenico Lombardi, a former IMF board member who now works for Canadian think tank CIGI, said: "She will have some catch-up to do, because clearly banking and markets were not at the core of her responsibilities at the IMF."

NEW DEPUTY GOVERNORS

Prior to Tuesday's announcement, Carney had overseen the appointment of outsiders to two other top positions at the Bank.

Broadbent was formerly a senior economist at Goldman Sachs - Carney's employer before he became a central banker. He will succeed Charlie Bean, who retires at the end of June.

Broadbent has said the failure of troubled banks to lend money to more efficient firms is one of the reasons behind Britain's weak economic productivity since the financial crisis.

Shafik - who holds Egyptian, U.S. and British nationality - has a background in development economics, working at the World Bank and as the top civil servant at Britain's overseas aid department before becoming deputy managing director at the IMF.

She oversaw much of the IMF's work in the turnaround programmes for Greece and Portugal, and at the World Bank helped get private money into infrastructure projects.

Shafik will be responsible for the BoE's eventual exit from its quantitative easing policy, under which it amassed 375 billion pounds ($624 billion) of government bonds. She will also steer a review of how the bank gathers intelligence on markets.

Since taking office in July, Carney has been keen to increase the number of women in senior roles at the BoE.

BNP Paribas economist David Tinsley said the appointments were a surprise, and would add "a degree of raised uncertainty" about when the central bank would start to lift interest rates from their record low of 0.5 percent.

Little is known about Shafik or Haldane's views on monetary policy, though Portes said she had been sympathetic to the IMF's move away from its highly orthodox policy prescriptions.

Broadbent and Dale both voted against the Bank's final expansion of asset purchases in July 2012, while Fisher was part of a dovish minority under former governor Mervyn King who wanted more asset purchases up until King's departure in June.

Broadbent is the first external member of the MPC to take up a position as deputy governor. He will be responsible for the BoE's analysis of Britain's economy, as well as bank notes.

Britain's finance ministry also named Anthony Habgood as chairman of the Court of Directors, which supervises the central bank. Habgood is chairman of brewer Whitbread and publishing company Reed Elsevier .

Habgood succeeds David Lees, whose term expires on July 1.

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