Why Cunliffe's appointment to the Bank of England matters

Sir Jon Cunliffe being knighted Sir Jon Cunliffe has been praised for his knowledge of European affairs

So what does the appointment by the Chancellor of Sir Jon Cunliffe as deputy governor of the Bank of England, with responsibility for financial stability, tell us?

Three things.

1) The Chancellor is seriously concerned that the eurozone bloc will constantly and consistently vote against the UK's interests when it comes to the regulation of banks and financial businesses.

Cunliffe knows the mandarins, central bankers and regulators of Europe better than anyone.

So the thinking is that if anyone can head off new rules perceived as damaging to the UK at an early enough stage, to pre-empt a political battle that Britain can never win (as a euro out, we don't have the votes), it may be him.

2) The Treasury became seriously alienated from the Bank in the dying days of Mervyn King's tenure as governor.

Mervyn King's attack on the Chancellor's new financial guarantees for some mortgage borrowers still rankles.

But more importantly, and as I have mentioned before, the Treasury was incensed that the Bank of England's Prudential Regulation Authority announced the imposition of a new leverage ratio on banks, to strengthen them, in a way that could have seriously impaired the ability of Barclays and Nationwide to provide vital credit.

The announcement was something of a bolt from the blue for the Treasury. And since then there has been a good deal of scrabbling around, to phase in the new requirement for both Barclays and Nationwide to hold additional capital in a way that doesn't crunch their short-term capacity to lend.

The point about Cunliffe is, that as a former Treasury second permanent secretary, he is unlikely to spring such unpleasant shocks on his erstwhile colleagues.

3) The new governor regards a strong, amicable relationship with the Treasury as essential to his ability to do his job.

George Osborne would never have appointed Cunliffe against his wishes.

As I pointed out a few weeks ago, the Treasury was never going to appoint either of the Bank of England candidates, Andy Haldane and Paul Fisher.

Carney did not die in a ditch to alter the Treasury's conviction that this job should not go to a Bank insider.

Robert Peston, economics editor Article written by Robert Peston Robert Peston Economics editor

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  • Comment number 44.

    This comment was removed because the moderators found it broke the house rules. Explain.

  • rate this

    Comment number 43.

    42 "who claims otherwise is delusional"

    But how to get turkeys to vote for Christmas?

    We need the politicians to understand that they will not get the huge consultancy contracts OR we could try to make it a criminal offence, created by the judiciary (a la Lord Denning), to hire politicians under such circumstances.

    Unless this blatant corruption is nipped in the bud 'things can only get worse!'

  • rate this

    Comment number 42.


    Indeed we must.

    And it starts by recognition across the board that the market, far from being reliable enough to regulate itself, needs Govt. regulatory frameworks in place in order to stop business EXPLOINTING us consumers time & again...

    ...competition is a phoney regulatory mechanism that simply does not work...

    ...anyone who claims otherwise is delusional...

  • rate this

    Comment number 41.

    The Tories want to have a foot in both camps as usual, the first to bank roll the party and have a world banking industry, we have little else, it funds the housing market building industry, DIY industry, and does not invest in the UK plc's manufacturing expertise, whilst paying out huge bonuses. the Europeans would like a slice of this cake too

  • rate this

    Comment number 40.

    About time the Bank made lending regulations, pinching the role from the political football vote gaining device.No loan should be available for more than 70% of the low range valuation.Never more than 3 times basic income.Only plain old repayment type too.No fancy imaginative, ending up cons types, like interest only, low start, endowment, etc.Banning any reliance or use of any government subsidy.

  • rate this

    Comment number 39.


    die in a ditch : fight to the last man ,to die rather than surrender.

  • rate this

    Comment number 38.

    Re 27. mr_market

    capitalism isn't the problem, the problem is that we don't have it. what we have now is crony capitalism and massive market manipulation. the market should set interest rates, money printing should be illegal and the BoE is an unnecessary institution whose real mandate is to serve the interests of private banking.

    the rest of your comment is spot on.

  • rate this

    Comment number 37.

    'good to see recognition in many comments of the treasury's brain-dead housing bubble scheme. Since the financial crisis the efforts of policy-makers have been to prop up the housing market at all costs - they know it's a Ponzi scheme that, when it collapses, will take the economy down with it. Despite all these efforts it will collapse in the end as ALL Ponzi schemes eventually do.

  • rate this

    Comment number 36.

    Check out the photo above

    If you removed the ribbon, you could be forgiven for thinking it was a picture of a man in front of a mirror.

    Who says the "Old Boy Network" is dead?

  • rate this

    Comment number 35.

    Sorry to be 'thick'.....Can someone explain Peston's

    'Carney did not die in a ditch to alter the Treasury's conviction that this job should not go to a Bank insider'

  • rate this

    Comment number 34.

    This guy is a career civil servant, focussed on managing the UK economy:

    1998 - Deputy Director for International Finance
    2001 - Managing Director of Finance, Regulation and Industry
    2005 - Second Permanent Secretary

    “No problem can be solved from the same level of consciousness that created it.”

    Albert Einstein

  • rate this

    Comment number 33.

    About 23% of our GDP is financial services so Gideon is right to be windy over what Brussels might try to pull.
    Putting Mr. Cunliffe in is a a means of keeping an eye on what is happening within the BoE. The posh boy does not want any more Merv type moves played out to rain on his parade.
    But the current 0.6% rise in the economy is illusory. People are spending savings. It won't be sustainable!

  • rate this

    Comment number 32.

    31.Little_Old_Me "If GO thinks that is a bad thing then clearly is on the SIDE OF BIG BUSINESS NOT THE VOTERS who pay his wages"

    Isn't that the whole point. Politicians (hope for) retirement jobs are hugely profitable (see T. Blair etc.) and paid by big business/banks - so the vote with their own interests at heart.

    We must take steps to prevent this form of corruption and corrupt influence.

  • rate this

    Comment number 31.

    The boy Gideon, our work experience Chancellor, thinks the member states of the EU might vote against UK interests in finance...

    ...if voting for a stable, less greedy, dangerous, needing bail outs culture comes from such voting then bring it on...!!!

    If GO thinks that is a bad thing then clearly is on the SIDE OF BIG BUSINESS NOT THE VOTERS who pay his wages & the bankers' bail outs....

  • rate this

    Comment number 30.

    The destruction of US housing equity 2008/2009 was quite amazing as is the price being paid to boost the economy. No one has openly addressed financialisation and the fundemental changes it has created.

    The housing crash made the US economy competitive. That is being thrown away by tax dodging idiots. The housing crash created realistic property values and new normal and reprieve.

  • rate this

    Comment number 29.

    Around 40% of new build purchase price is profit and interest on the build. Purchaser then pays mortgage interest on that if loan to equity is high. Buy land, build your own.

    Any analysis showing renting is cheaper or better for the renter is twisting figures into rubbish

    People want to own homes. Property is over priced and valued incorrectly. Valuation is flawed ~ fatal error asset inflation

  • rate this

    Comment number 28.

    This http://www.piie.com/publications/opeds/oped.cfm?ResearchID=2446 is a beautifully stupid essay by an idiot to which l mark as follows.

    From his own text, the case made is destroyed. Mexico, Nepal, and Russia all have home-ownership rates of more than 80%.

    The problem is bubbles and the gravy trains that involves every homeowner jacking up price.

    Posen of course rents his home.

  • rate this

    Comment number 27.

    Why the BoE doesn't matter:

    It's propping up a defunct system of capitalism that needs to be allowed to die.

    Merv was despicably culpable until he knew he was on his way out when he grew half a testicle.

    Prop up house prices. Keep interests rates low. Whack in some funny money (QE) to make us all poorer but think we are all richer.

    BoE = Kick the Can Down The Road and hope for a miracle.

  • rate this

    Comment number 26.

    Yet another incredibly poor decision, it makes the appointment of Crosby at the FSA by the previous government look like the work of genius. Cunliffe was culpable in the banking crisis under Brown, his next appointment should have been in front of a judge. What next, Jamie Dimon in charge of QE, Michael Bloomberg trading security, and Huawei market transparency?

  • rate this

    Comment number 25.

    And the Banking Apologist are out in force tonight, any recent comment daring to suggest that the CoL doesn't run the country (what a disaster that was, is and wil be).

    Anyone can siphon off money, it's really easy. Anyone can bet with someone else's money, it's great fun.

    Britain should NOT have an economy based on the Banking Industry. It's a house of cards.


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