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 Carney, who took over last year, had already been planning changes
to the upper echelons when the central bank was drawn into a scandal
over alleged manipulation of currency markets.
He is due to give details in a speech on Tuesday of his plans, which
include creating a deputy governor who will be responsible for
overseeing markets and banking services.
The new position, which takes the number of deputy governors to
four, reflects broad powers the BoE has gained under a reform of
British financial regulation since the global crisis.
Until recently Fisher — who is Executive Director, Markets — would
have been an obvious candidate for the new position which covers
much of his current job, albeit with expanded responsibilities and
at one level higher in the BoE hierarchy.
But the BoE suspended an employee this month in an internal
investigation into whether staff turned a blind eye to signs of
manipulation of London's $2.1 trillion-a-day currency market.
There is no evidence of wrongdoing by Fisher, who was previously the
suspended employee's manager, but he came under fire last week from
a parliamentary committee over his role in supervising currency
markets.
The stakes are high for Fisher. His term on the Monetary Policy
Committee — where he was one of the stronger supporters of more
stimulus for Britain's economy after the financial crisis — ends in
May.
As a BoE executive director, this would normally be renewed
automatically but if Fisher misses out on the job, he might have to
make way on the committee for the new deputy governor.
Asked if Fisher or other BoE staff would apply for the new post, the
BoE said it had no comment on possible candidates. It also did not
comment on what impact, if any, the inquiry would have.
Fisher has said he first heard of the currency accusations only last
October, and that the alleged collusion by market-makers under
investigation now was different from less serious discussions about
hedge funds' activity as far back as 2006.
With the results of the internal inquiry unlikely until next year,
Carney might be reluctant to promote Fisher before he knows its
conclusions.
Carney said the creation of the new role was not a response to the
inquiry, but whoever fills it will conduct "a root and branch review
of how we conduct market intelligence".
Details of the new deputy governor's role and broader changes at the
BoE should become clearer on Tuesday. One of the aims is to
integrate better teams of financial supervisors who joined the BoE
last April, when it assumed powers to ensure the banking sector does
not put the economy at risk again.
However, former Monetary Policy Committee member Andrew Sentance
said he feared the new deputy governor might be given no real
authority. "In my experience, all important decisions in the Bank
are taken by and announced by the governor," he said.
FISHER ON THE HOOK?
Legal restrictions on whom Carney can appoint to another BoE body — the Financial Policy Committee which regulates British banks — are
creating further complications. Oddly, these make it unlikely that
the new deputy governor will have a vote on the committee and will
attend only in an advisory capacity.
Therefore, to avoid the fourth deputy governor looking like a spare
wheel compared with the three existing ones, the new post could come
with a seat on the Monetary Policy Committee — although there is no
guarantee of that.
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Membership of the committee, on which two of the three existing
deputy governors all sit, is fixed at nine. So if the new job goes
to someone other than Fisher, he might be the one who has to make
way for the new arrival.
Britain's finance minister chooses seven committee members, and
the Treasury is expected to name a replacement for one of them — retiring deputy governor for monetary policy Charlie Bean — on
Tuesday, a source familiar with the appointments process said.
Carney has the final say on the remaining two: the BoE's chief
economist and an official with executive responsibility for monetary
policy operations.
The latter description seems to fit the new deputy governor's
position. Carney said whoever gets the job would have "the
senior-most executive responsibility" for the BoE's 375 billion
pounds ($623 billion) of bond holdings accumulated under its drive
to help the economy recover from the crisis.
Fisher is currently responsible for the BoE's monetary policy
operations.
Even without a year-long inquiry hanging over him, Carney may wish
to continue his pattern of recruiting externally for senior BoE
jobs. "Carney might want to get his own person from outside, to add
to that impression of the Bank being shaken up and having more
outside influences," said Tony Yates, a senior BoE economist until
last year and now reader in economics at the University of Bristol.
Another possibility is the BoE's chief cashier and executive
director for banking, Chris Salmon.
But Yates said it was far too early to rule Fisher out from a more
senior role at the BoE. He also said that removing Fisher from the
Monetary Policy Committee would be seen as a demotion within the
bank. "If the new deputy governor takes the slot of (Fisher) ...
that would be a headache for them," said Yates.
Showing how seriously the BoE is taking the foreign exchange
allegations, the inquiry will be led by lawyer Anthony Grabiner, who
previously investigated phone-hacking at Rupert Murdoch's News Corp.
"What the Bank is likely to be more concerned about, and the
regulators are certainly concerned about, is that it would appear
the systems and controls weren't sufficient to detect or deter what
has happened," said Owen Watkins, a financial services lawyer at
Lewis Silkin in London.
Lawmakers — who scrutinize but cannot veto top BoE appointments — were unimpressed when Fisher said last week it was the job of the
Financial Conduct Authority, Britain's chief markets regulator, not
the BoE, to investigate malpractice.
"This is the first real test for the BoE's new governance
structures. Early signs are not encouraging," said Andrew Tyrie, who
chairs the parliamentary Treasury committee.
(Additional reporting by Jamie McGeever; editing by William
Schomberg, Alexander Smith and David Stamp)
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