No obvious successor when Patrick Honohan departs Central Bank

The key decision facing Minister for Finance Michael Noonan in replacing Patrick Honohan as governor of the Central Bank will be what type of appointment to opt for. Will an insider from the official system be appointed, or will Noonan bring in someone from the private sector or academia, either here or abroad?

The appointment is made by the President, Michael D Higgins, but it is in the gift of the Government, through the Minister for Finance. While in the past ministers have chosen their man – a woman has never held the post – the indications are that this time a formal search and selection process will be put in place.

Financial crisis

The new governor will hope for calmer times than those experienced by Honohan, who was appointed on September 26th, 2009, in the teeth of the financial crisis.The iconic public moment of his governorship was his call to

Morning Ireland

on November 18th, 2010, to say it was inevitable that Ireland would enter a bailout programme, at a time when the government of the day was still equivocating.

Honohan oversaw a tumultuous period, which included, for the first couple of years, sustained pressure on the financial system, requiring enormous liquidity support from the ECB, before Ireland finally entered the bailout.

Since then he has overseen the repair and recapitalisation of the banking system. He was also the key “point man” with Frankfurt on the complicated deal to restructure the promissory notes.

He will confirm his decision to resign at the presentation of the bank’s annual report today, when it will announce a bumper financial surplus. His stepping down at the end of the year means the appointment of a successor will fall to this Government – assuming its lasts into 2016 – and not the next administration.

In the frame

It is difficult to judge who might be in the frame, given the open recruitment process. The bank has two deputy governors, Cyril Roux and Stefan Gerlach, and a range of senior managers at the next level, some of whom may be contenders, including Gabriel Fagan, the bank’s chief economist, and Gareth Murphy, head of markets supervision.

The most senior official working on banking in the Department of Finance, the traditional breeding ground for Central Bank governors, is Ann Nolan, second secretary general in charge of the Financial Services Directorate. Candidates might also come from elsewhere in the department or from the National Treasury Management Agency. It will also be open to the Government to make an appointment from academia or to seek an appointee from the banking or regulatory sector overseas, including from the ECB. Sources say that as well as the policy aspect of the job, it is also a management role.

“It is very unusual that you are effectively the chair and chief executive of an organisation,” says a source. One option might be to split the two roles.