Threadneedle Street: Osborne drafts in Canadian to lead Bank of England and City regulation: Chorus of approval over Carney's appointment New governor to oversee reform of financial firms

George Osborne sprang a surprise on the City yesterday when he put Canada's central bank chief in charge of the Bank of England.

Mark Carney, the governor of the Bank of Canada, is largely unknown outside the cloistered circles of central bankers and financial regulators, but has gained a reputation as a tough operator able to confront leading banks at the heart of the financial crisis.

The chancellor said Carney would bring a wealth of experience to the job, which from next year will include acting as the City's top watchdog alongside setting interest rates and monetary policy.

MPs on all sides of the house welcomed the appointment, with many arguing that he was capable of taming the City and preventing a repeat of the financial crisis.

As well as being the first non-Briton, Carney, who will earn pounds 305,000 a year, is the first governor in the Bank's history to be chosen after an open recruitment process, in which the role was advertised and candidates interviewed by a panel.

Osborne said he had recommended Carney to David Cameron, who in turn recommended him to the Queen for appointment. The chancellor said Carney was "the outstanding central banker of his generation with unparalleled expertise in financial regulation".

He told MPs: "He will bring a fresh perspective. He has got what it takes to help bring families and businesses through these incredibly challenging economic times. My responsibility was to get the best for Britain, and with Mark Carney we've got that."

Born in Canada, the 47-year-old intends to bring his British wife and four children to the UK and apply for citizenship.

But he rejected the Treasury's stipulation that the new governor serve for a single eight-year term in favour of a contract that runs for only five years.

In appointing a foreign national to the top job at the Bank of England, Osborne rejected several high-profile British candidates, including the deputy governor and frontrunner for the job, Paul Tucker, and the chairman of the Financial Services Authority, Adair Turner.

Tucker said yesterday: "I warmly congratulate Mark Carney on his appointment to succeed Sir Mervyn King as governor."

Tucker undermined his chances of promotion with a poor performance in front of MPs on the Treasury select committee after becoming embroiled with disgraced Barclays boss Bob Diamond during the Libor interest rate fixing scandal.

Turner was considered an outsider following his close association with the previous Labour administration.

The only known woman candidate from the secret, five-person list, MEP Sharon Bowles, was considered to be lacking experience despite several years as head of the monetary and economic committee in the European parliament.

The shadow chancellor, Ed Balls, was quick to praise Osborne's decision to pursue Carney, who repeatedly denied that he was interested in the job, saying he had worked with Carney on several occasions and found him to be an impressive character who is well qualified to take on the role. Labour backbench MPs joined the chorus of approval, with one describing Carney as a breath of fresh air.

City analysts said that while they were surprised by the appointment, Canada's ability to survive the financial crash had boosted the status of its central bank boss. His promotion last year to head the G20 financial stability board, which is charged with forcing the world's major banks to agree and implement global standards, also elevated him to the top rank of financial regulators.

Carney said he had strong ties to the UK, not only through his wife's family, but also from working here for a decade and making contacts with UK businesses and financial institutions over recent years.

He said: "I think I can play a constructive role in relaunching the institution in its new role in promoting financial stability and the regulation of financial services."

The chairman of the Treasury select committee, Andrew Tyrie, welcomed the appointment of an "extremely talented and experienced choice".

But there will be some who question why an outsider with little in-depth knowledge of the UK economy should take on the country's most powerful regulatory job. There is also the day-to-day management of monetary policy as head of the nine-strong monetary policy committee, which has eight economists who have a much deeper and broader knowledge of the business culture and economic quirks of the UK economy.

Canada, like Sweden, is credited with surviving the financial crash largely unscathed, though both countries suffered crippling economic crises in the early 1990s, which led to them putting strong regulations in place. Osborne wants Carney to carry through a series of structural reforms to City regulation.

The Bank of England will become the main regulator, taking responsibility for making sure the financial system becomes robust enough to withstand a future crash of the same magnitude as the 2008 credit crunch. Osborne said: "It says something of Mark Carney's abilities that he was chosen by the world's financial regulators to run the global regulator, the financial stability board."

Tyrie said MPs will interview Carney in a pre-appointment hearing: "The hearing will cover not only his professional competence and personal independence, but also his experience, leadership qualities and views on the need to strengthen the internal governance and accountability of the Bank to parliament and to the public."

Leader comment, page 30

Captions:

Canadian central bank chief, Mark Carney, will take over the reins at the Bank of England next year, George Osborne told MPs yesterday Photograph: Chris Wattie/Reuters