Gieve was not up to Bank job, says City

Meanwhile, the Bank today appointed its chief economist Charlie Bean to replace a second departing Deputy, Rachel Lomax.

Gieve quit last night as Chancellor Alistair Darling outlined plans to reform how the Bank deals with financial stability - the area for which Gieve was responsible.

City sources said Gieve was not up to the job and was exposed by the collapse of Northern Rock - but many did not wish to comment on the record for fear of retribution from the Bank and the Financial Services Authority.

Privately they said his mauling at the hands of MPs after the run on the Newcastle mortgage lender meant his days were numbered.

Gieve quit as Darling outlined plans to set up a financial stability committee to work alongside the monetary policy committee. His exit, in the spring, paves the way for the Bean to replace Lomax in her role overseeing monetary policy. Paul Tucker is tipped to be in charge of banking stability.

The Treasury had been backing Tucker to replace Lomax while Bank Governor Mervyn King was understood to be trumpeting Bean. Two vacancies mean Whitehall and Threadneedle Street can be satisfied.

Peter Hahn, fellow of the Cass Business School, said: "Gieve was the wrong man, with the wrong credentials in the wrong place at the wrong time. He didn't have the right background for this job.

"The Bank needs to look towards people with 10 or maybe 20 years of experience-in the City to fill these top jobs. It's easy to plan how to avoid the mistakes you made last year, but they need people who can predict the new mistakes that could lie ahead. Gieve's appointment was made by the Government. That exposed the fallacy of the idea that we have an independent Bank of England - a theme that has just been replayed in the battle for the Deputy Governor's job."

David Buik, City commentator at BGC Partners, said Gieve "did not cover himself in glory in the handling of banking stability with particular reference to Northern Rock".

Gieve is said to have tinkered with his statement on his BlackBerry as the Chancellor and the Governor were speaking. It said: "In recent months I have been leading work in the Bank on a new and better framework for financial stability. I fully support the new proposals and, in particular, the enhanced role for the Bank of England.

"Once legislation is in place, building up the new capabilities in the Bank will require a long-term commitment. It makes sense for someone else to take on this task who is prepared to commit himself to a full five-year term. I would not wish to serve another five-year term."

John McFall, chairman of the Treasury Select Committee, said: "This is unexpected in the light of the turbulence in the money markets and the importance the Governor has attached to financial stability. It is the signal for a new start and I hope it indicates financial stability is the number one priority."

BUSY 'BACKWATER'

Sir John Gieve, 58, is a career civil servant, having joined the Treasury almost immediately after leaving New College, Oxford. A scion of Savile Row tailoring firm Gieves & Hawkes, he was permanent secretary at the Home Office from 2001 to 2005, leaving after criticism of its policy on releasing foreign prisoners.
His appointment as Deputy Governor in January 2006 was seen by many as a way of easing him into a gentle backwater. Little could they have known the Northern Rock crisis would break within eight months.
Gieve lives in North London and has two sons in their twenties. An Arsenal fan, he is a keen cyclist and golfer.

THE POINTY-HEAD

Charlie Bean, 54, is the Bank of England's chief economist and an executive director. Seen as neither hawk nor dove, he is a serious pointyhead with a string of academic qualifications, and was Governor Mervyn King's first choice for Deputy.
Educated privately at Brentwood School, Bean graduated from Emmanuel College, Cambridge, and did a PhD at Massachusetts Institute of Technology. Two spells in the Treasury saw him move to the London School of Economics, where he became head of the economics department. He joined the Bank in 2000.
He lives in Chiswick and enjoys cricket and opera.