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Mark Carney tipped to replace Christine Lagarde at the IMF

Oscar Williams-Grut
Senior City Correspondent, Yahoo Finance UK
Governor of the Bank of England Mark Carney reacts during the annual Mansion House dinner in London. Photo: Simon Dawson/Reuters

The surprise nomination of Christine Lagarde as the new head of the European Central Bank has left the world wondering: Who will take charge of the International Monetary Foundation?

The IMF, the global bank that lends to countries and governments, is one of the most influential non-political organisations in the world. Its managing director is one of the world’s most powerful figures in both finance and geopolitics.

Lagarde has run the IMF since 2011, navigating the Greek debt crisis and moving markets with proclamations on global growth. She is a stalwart of Davos, Brussels, and Washington.

Her departure will leave big shoes to fill. Could outgoing Bank of England governor Mark Carney be the right candidate to fill them?

‘A safe pair of hands’

“He has the CV, the experience, and the connections to be seen as a safe pair of hands,” James Knightly, the chief international economist at ING, told Yahoo Finance UK.

Since taking charge of the Bank of England in 2013, Carney has steered the central bank through the 2016 Brexit vote and its fallout, while also finding time to think carefully about other topics such as the rising tide of fintech innovation in Britain.

“Carney has done a remarkable job at the BoE during the midst of the Brexit chaos,” Naeem Aslam, chief market analyst at ThinkMarkets, told Yahoo Finance UK.

READ MORE: Christine Lagarde a 'dangerous look' for ECB

“Carney is a definite contender for the top spot at the IMF. It is usual for central bankers to go for a role like this and we believe that Carney has all the experience and charisma to fit the bill.”

Betting markets agree. Carney is a 7/2 favourite to replace Lagarde, according to Betway. His closest rival is former Reserve Bank of India governor Raghuram Rajan, with odds of 9/2. (Rajan is also a hot favourite to replace Carney at the Bank of England when he leaves next year.)

‘Timing almost perfect’

International Monetary Fund Managing Director Christine Lagarde. Photo: Carlos Jasso/Reuters

Another point in Carney’s favour is his time chairing the Financial Stability Board (FSB) between 2011 and 2018. The international body was set up in the wake of the financial crisis to prevent the world from hurtling into more financial problems.

Running the IMF would be the “natural succession” from his role at the FSB, according to Simon French, the chief economist at stockbroker Panmure Gordon.

Carney may already be auditioning for the role. Samuel Tombs, the chief UK economist at Pantheon Macroeconomics, said “Carney’s speeches in the last few years have been global in focus.”

READ MORE: Sterling dips below $1.26 on Mark Carney's bleak economic forecast

“Carney is a smooth internationalist and effective communicator,” Neil Wilson, the chief market analyst at Markets.com, told Yahoo Finance UK. “The IMF is right up his street.”

ING’s Knightly said “the timing is looking almost perfect for an immediate handover.”

Carney is set to leave the Bank of England in January 2020. Lagarde will likely take up her position at the ECB in October.

The Canadian question

However, Carney could face a potential hurdle: his nationality.

“Historically the World Bank job goes to an American and the IMF job goes to a European,” Knightly said.

Carney was born in Canada and is, to most observers, Canadian. However, he could argue his way around this point. Carney holds an Irish passport, through his grandparents, and claimed British citizenship in 2018.

READ MORE: George Osborne eyes another job — running the IMF

Even if Carney is viewed by the judging panel as simply Canadian, it may not be a fatal problem.

There have been “hints” that America wants to shake-up the traditional geographic job split of top roles, Knightly said.

“Putting in a Canadian (with European and global experience) could well get enough backing.”

Another hurdle is the man who hired him: George Osborne. The former UK chancellor is said to favour the top job and has a formidable political contact book he could potentially leverage in his favour.

Ambitions elsewhere?

Canadian Prime Minister Justin Trudeau holds a press conference on the roof of the Canadian embassy in Washington, DC. Photo: Nicholas Kamm/AFP/Getty Images

Perhaps the biggest thing that could keep Carney away from Washington is his own ambitions.

“There had been lots of chatter over the years about whether he wanted to go into Canadian politics and given we have the Canada election this year that remains a possibility,” Knightly said.

Canadian prime minister Justin Trudeau is facing a scandal over allegedly pressuring prosecutors not to charge a Canadian engineering firm accused of bribery. Canada goes to the polls later this year and could oust Trudeau.

Carney will likely “have one eye on Trudeau’s travails,” Panmure’s French said.

“If Trudeau loses to Scheer in October then there is a vacancy, probably. I fancy he’d take soundings.”

Carney served in Canada’s Department of Finance between 2004 and 2007, although not in an elected role. It would be a surprise to see him lead one of Canada’s major political parties after years out of the country and no experience running for office.

Still, “anything’s possible,” CMC Markets chief market analyst Michael Hewson told Yahoo Finance UK.

“If you’d asked me six months ago if I thought it was likely that Lagarde would go to ECB I would have said no, and yet here we are,” Hewson said. “In these times I wouldn’t rule it out.”

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Oscar Williams-Grut covers banking, fintech, and finance for Yahoo Finance UK. Follow him on Twitter at @OscarWGrut.

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