Carolyn Wilkins, who nearly ended the long reign of men heading up the Bank of Canada, will resign when her term as senior deputy governor ends next year.
Wilkins, a policy innovator who is the most successful woman in the history of Canadian central banking, was one of two people on the shortlist to replace Stephen Poloz as governor at the end of April.
She impressed in the trenches during the Great Recession, and used her promotion to the second-highest rank after governor to push the Bank of Canada to the forefront of international analysis of how digital technology could transform finance.
Poloz leaned heavily on Wilkins, tapping her to lead a years-long review of how the central bank set interest rates, an effort that could result in the first major overhaul of monetary policy in a generation when it concludes in 2021.
Nevertheless, Bill Morneau, the former finance minister, chose Tiff Macklem, a long-time star of the Canadian economic scene who many thought should have gotten the job instead of Poloz in 2013. A relatively recent convention also worked against Wilkins: no government has chosen a governor directly from the Bank of Canada’s ranks since Paul Martin, the finance minister in Jean Chrétien’s administration, elevated Gordon Thiessen in 1994.
It’s difficult to argue that Morneau erred in choosing Macklem, a former senior deputy who also served at a high level in the Finance Department. But it meant passing on a chance to put a woman in the job at a time when gender and racial diversity have become widely accepted tenets of effective corporate governance and institutional credibility. The Bank of Canada’s 10 governors since its formation in 1934 have all been white men.
“It has been a great honour and privilege to serve Canadians in this role, and throughout my 20 years at the Bank,” Wilkins said in a press release on Sept. 17. “Building and carrying out a shared vision for the bank with Governor Poloz has been a professional highlight,” she added. “I’ve also enjoyed working closely again with Governor Macklem. The Bank is in good hands.”
By deciding to leave, Wilkins is following the path Macklem took after he lost out to Poloz in May 2013. Macklem, who was also then senior deputy governor, announced in December 2013 — six months after he was passed over — that he had accepted a job as dean of the University of Toronto’s Rotman School of Management. Macklem officially left five months later and was replaced by Wilkins, who had been serving as an adviser to Poloz.
Experience away from the central bank appears to have become a requirement for running it. Wilkins, who broke one glass ceiling when she won the competition to become senior deputy governor, is still young enough to be governor. Macklem, 59, will have reached retirement age when his term ends in 2027.
But that’s the future. Here in the present, Wilkins’ decision to leave will trigger a reshuffling of the Bank of Canada’s leadership group ahead of what promises to be an exceptional period in the central bank’s history.
The central bank has already committed to doing its part to fight the COVID-19 recession by keeping interest rates near zero for at least a couple of years, evidence that the country’s biggest collection of PhD economists think the economy is extraordinarily weak.
Canadian policy-makers for the first time have deployed quantitative easing, or QE, in which the central bank uses its unique power to create money in order to buy debt worth hundreds of billions of dollars. The experience of the U.S. Federal Reserve and other central banks suggests the aggressive strategy will work, but QE remains an experiment that must be closely watched.
Wilkins’ mandate review, which could result in a decision to replace the Bank of Canada’s inflation target with a new approach to setting interest rates, also looms. All told, it won’t be a casual seven years for Macklem and his deputies.
Like the governor, the senior deputy governor is a cabinet appointment, so Chrystia Freeland, who replaced Morneau last month as finance minister, will influence the decision. At the same time, convention grants the governor significant say over who serves as his top lieutenant. The independent directors of the Bank of Canada’s board will lead the search and recommend candidates to Freeland.
The choice will almost certainly be a woman or an ethnic minority.
At one point, Poloz had three women advising him as deputies on the Bank of Canada’s governing council. Wilkins was the first woman to have her signature appear on legal tender, and she and Poloz oversaw the process that resulted in Viola Desmond becoming the face of the new $10 bill.
But professional churn has left Wilkins as the only woman left among the governor’s five deputies. The gender balance on the central bank’s larger management team is better, but the group is overwhelmingly white.
An institution such as the Bank of Canada must do better, and Freeland, Macklem and the board of directors surely know it.