(Bloomberg) -- A BlackRock Inc. executive will help choose the second most powerful official at the Bank of England, an arrangement that gives the world’s largest money manager a chance to help shape future policy direction by the central bank.
Downing Street has tapped Stephen Cohen, BlackRock’s head of Europe, the Middle East and Africa, to sit on a five-member panel reviewing prospective deputy governors for the BOE. The Treasury needs to replace Ben Broadbent, the bank’s deputy governor for monetary policy, who is due to step down in June.
BlackRock manages billions of pounds of macro funds in the UK, which are sensitive to the central bank’s interest-rate policy. Broadbent, an economist and one of nine members of the committee that sets interest rates, arguably holds its next most important job after Governor Andrew Bailey.
The Treasury is seeking someone with “deep financial markets knowledge” and an understanding of how those markets interact “with the real economy,” according to an advertisement for the job that pays £288,700 ($360,500) a year.
Cohen will help draw up a shortlist and then interview selected candidates before making final recommendations to Chancellor of the Exchequer Jeremy Hunt.
Carsten Jung, a senior economist at the Institute for Public Policy Research who used to work at the BOE, said the Treasury’s arrangement gave “the appearance of a conflict of interest — given the bank is responsible for policing the financial system and making a person who represents one of the most powerful players in the financial markets part of the recruitment process.”
The Treasury didn’t respond to questions about whether Cohen’s appointment posed a potential conflict. The department said it was seeking to solicit a variety of opinions about candidates for the job.
“Given the importance of this role, panel members were chosen who bring a diversity of thought across public and private sector, with deep expertise in financial markets and macroeconomics,” the Treasury said in statement. “Stephen Cohen was chosen as someone who meets this criteria.”
BlackRock and the BOE declined to comment.
While the governance code on public appointments published in 2016 required assessment panels to include a member independent of the Treasury and bank, the department has only recently appointed members without prior government or central bank experience. The only similar example cited by people familiar with the process was Abrdn Plc Chairman Douglas Flint, who sits on the panel charged with reviewing candidates for an external appointment to the BOE’s Financial Policy Committee.
The Treasury wants to use more private sector experts on appointment panels to stamp out what it perceives as group think in policymaking, according to one person with knowledge of the situation. They believe that people like Cohen and Flint bring in a perspective less influenced by the culture of government.
BlackRock has long enjoyed close ties with the UK government. Former Chancellor George Osborne was an adviser to the company between 2017 and 2021. Former Osborne aide Rupert Harrison is a portfolio manager there and sits on an Economic Advisory Council created by Hunt last year.
The vetting panel Cohen sits on is led by James Bowler, permanent secretary at the Treasury. It also includes Sam Beckett, chief economic adviser at the Treasury; David Roberts, chair of the BOE court of directors; and Charlie Bean, a former BOE deputy governor for monetary policy.
Erik Britton, director of Fathom Consulting and another former BOE economist, said that Cohen’s role “presents a risk of conflict.” There should have been “some level of parliamentary disclosure or consultation process that set out the safeguards to minimize the risk of the perception of conflicts,” Britton said.
Although the appointment doesn’t need to be announced until March, the potential for a general election next year is putting pressure on the government to fill it soon. Once the prime minister dissolves Parliament, appointment processes are frozen.
Applications were due in by Wednesday, with interviews slated to be completed by Jan. 12. Headhunter Korn Ferry is running the recruitment effort.
Jung, at the Institute for Public Policy Research, said it’s unclear why a BlackRock executive had to be involved in the process. “There would have been a plethora of other options for people with a deep knowledge of financial markets who don’t have a current vested interest in bank policy,” Jung said.
--With assistance from Loukia Gyftopoulou.
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