Bank of Canada seeks deputy as Leduc exits
Big shoes to fill on Governing Council
Wanted: a francophone economist with elite research skills who can provide an outsider’s perspective on how we do things here in Canada.
The Bank of Canada announced June 13 that Sylvain Leduc, one of four deputy governors, will “return to San Francisco with his family” at the end of July and resume working at the Federal Reserve Bank of San Francisco.
Canada’s central bank said the search for a replacement would begin immediately. The board of directors will lead the process, and Boyden, the international executive recruitment firm, has been hired to beat the bushes for candidates.
The headhunters will have a difficult job matching Leduc’s unique resumé.
He was the San Francisco Fed’s vice-president of microeconomic and macroeconomic research when he joined the Bank of Canada two years ago, taking the place of Agathe Côté, who retired.
Leduc, whose hometown is Montreal, is the only francophone on the Governing Council. There is no requirement forcing the central bank to set aside one of the deputy positions for a native French speaker, but it’s unlikely the central bank would choose to go without one.
That unofficial requirement made Leduc a dream candidate in 2016; not only was he a Quebecer, but he came with years of experience in the Federal Reserve System. With the exception of Timothy Lane, who joined the Bank of Canada in 2008 after a couple of decades at the International Monetary Fund, the world views of the other deputies were formed while working in Canada.
“Sylvain has been a wonderful addition to the Governing Council,” Bank of Canada Governor Stephen Poloz said in a statement that praised Leduc for helping the central bank to up its game as a research institution. “While we are sorry to say goodbye to this brilliant Canadian, we wish him every success in his future career in central banking.”
For a short time, at least one observer of the Bank of Canada thought Leduc’s future involved an impressive promotion.
Derek Holt, an economist at Bank of Nova Scotia in Toronto, sent a knee-jerk note to his clients speculating that Leduc had been tapped to become the next president of the San Francisco Fed, a stepping stone to bigger and better things in recent years. The last person to hold the job, John Williams, was chosen earlier this year to lead the New York Fed. Williams replaced Janet Yellen, who left California for Washington to become vice-chair of the Board of Governors before taking over from Ben Bernanke as the U.S.’s top central banker.
Alas, Leduc isn’t on the verge of becoming the next Mark Carney, bolting Canada to set monetary policy for another country. Holt was forced to issue a second note when the Bank put out word that Leduc wasn’t applying for the vacant leadership position at the San Francisco Fed, one of 12 regional banks that work with the Board of Governors to set U.S. interest rates.
It’s difficult to know how Leduc’s departure will affect Canadian policy.
The Governing Council is a creation of the central bank, not the Bank of Canada Act, so the men and women appointed to it are accountable to the institution and have no particular obligation to become public figures. Deputies tend to speak only a couple of times a year, and when they do, they give nothing away about their personal opinions about policy, which reflects the consensus of the four deputies; the senior deputy governor, currently Carolyn Wilkins; and the governor, who alone has legal authority to raise and lower interest rates.
Leduc was one of two deputies tasked with overseeing the Bank of Canada’s monitoring of the financial system. Last month, he was tapped to write the central bank’s second economic progress report, a new publication, in the form of a speech, that is meant to bridge the gap between the formal quarterly economic updates. Leduc took the opportunity to put extra emphasis on wage dynamics, noting that wages were rising faster in regions such as Quebec, where labour pools are relatively stagnant, than they were in places such as British Columbia, a magnet for immigrants.
For those who assume Poloz makes all the decisions anyway, the departure of one deputy — and the junior one at that — will matter little. But Poloz insists he’s merely the captain of the team, not the coach, and there is no reason we shouldn’t believe him. Leduc’s voice was heard.
There is a theory in soccer that a team is only as good as its weakest player. That idea applies to consensus decision-making, too. Committees staffed with talented individuals from diverse backgrounds will make the best decisions. The Governing Council in its current form is well-structured: it has two women, and all the members bring a different expertise to policy discussions.
Poloz will captain this particular team one more time, as Leduc is committed to staying on through the policy decision scheduled for July 11. One of his most important tasks thereafter will be maintaining a committee of diverse perspectives. That person surely exists, but he or she may not be easy to find.