There was much surprise in the City of London over the appointment of Mark Carney, a Canadian, to take over as governor of the Bank of England (BoE) from July, with commentators trying to trace the links between his experience in Canada and the larger and trickier problems he will inherit next year. Carney carries with him some credibility for how well the Canadian economy and banking system have weathered the economic downturn that accompanied the financial crisis. Hopeful commentators say he contributed to this as a pragmatic governor of a central bank with a flexible inflation-targeting mandate, a bit like the BoEs, transmitting monetary policy through an oligopolistic banking system dominated by six large universal banks, a little like the UKs. However, similarities only go so far. Amit Kara, economist at UBS, points out: To start with, the UK governments fiscal position is a lot weaker and its economic growth performance nowhere near as impressive as Canadas in the last few years. The BoE will be a bigger and more complex institution with its new regulatory powers, and the job of the governor will most likely change with it. Kara points out that much of Canadas robust economic performance in recent years derives from strong export growth, which the UK has not enjoyed. Meanwhile, further complicating matters for Carney in exercising the BoEs new regulatory powers, he will have to balance regulating UK banks with also protecting their interests in what promises to be a fraught debate in the years ahead between the eurozone members of the EU and its non-eurozone members over banking union. In Canada, banks have been pushed to improve the quantity and loss-absorbing quality of their capital, and also been subject to a leverage ratio limiting growth even in supposedly low-risk assets. However, economic and regulatory affairs consultant Graham Bishop wonders how much credit Carney can really claim for the healthy state of Canadian banks, saying their capacity to weather recent storms could be attributed to ingrained cultural and institutional traditions of risk aversion as much as the actions of a single, though clearly highly talented, individual. For many in the City, though, Carney starts with plenty of goodwill for one simple reason: he is not Mervyn King. Kara says: Unlike King, who favours a complete separation of the banking sector activities, Carney appears to be more flexible. His colleagues at UBS, banks analysts Alastair Ryan and John-Paul Crutchley, who have been critical of the imbalance in the regulatory agenda in the UK between demanding that banks raise ever more capital and ensuring they continue to lend productively to the economy, are pleased to welcome a new face. They describe Carneys appointment as potentially a significant positive turn for both the economy and the banks. They point out that UK banks have attained a similarly well-capitalized position as Canadian banks and hope that Carney now concentrates on making the banking system function again. Canadian banks have continued to lend responsibly over the last several years, supporting healthy GDP growth, state Ryan and Crutchley. While we do not expect any reopening of issues such as ring-fencing, we consider the new governor less likely to pursue a further tightening of UK standards already well above Basel requirements in capital, funding and liquidity. It remains to be seen, of course, how Carney adapts to running the central bank of a country with a weaker banking system than Canadas, with less capacity to grow capital organically. Ryan and Crutchley say: While recognizing that the UK is not Canada and the UK banks are, on average, substantially less profitable at present than the Canadian banks, we believe the track record of the incoming governor is one of pushing the banks consistently towards higher capital levels but at a [more] measured pace than has been experienced in the UK.