In a strategic move to bolster financial stability in the United Kingdom, Sarah Breeden, a senior Bank of England official and member of the Central Bank Digital Currency (CBDC) task force, has been appointed as the new deputy governor. The announcement comes as Jon Cunliffe’s term draws to a close, during which he played a significant role in ushering in the UK’s digital pound consultation and considering new rules for stablecoin payments.
Breeden’s appointment as deputy governor will officially take effect on November 1, 2023. In her new role, she will sit on key committees, including the Financial Policy Committee, the Monetary Policy Committee responsible for setting interest rates, and the Prudential Regulation Committee. This combination of roles will allow her to play a vital link between financial stability and monetary policy, facilitating a coordinated approach to economic challenges.
Breeden’s extensive experience in the financial sector makes her a fitting choice for the role. She has been the executive director for financial stability strategy and risk and has also chaired efforts to build resilience in the pensions industry and address climate change challenges. Moreover, she has spearheaded the BoE’s work on so-called shadow banks, including the first markets stress test, indicating her ability to tackle complex financial issues.
The UK is currently facing heightened financial stability risks, with rising interest rates posing potential threats to the banking system due to higher defaults on fixed-rate mortgages and increased financial strain on households. Additionally, concerns have been raised about risks for hedge funds, pension funds, private equity, and other volatile areas of the market, where asset prices have surged, and borrowing levels are high.
Breeden’s appointment marks a notable departure from previous practices of selecting deputy governors from the ranks of the Treasury. Her inclusion in the Monetary Policy Committee as one of four women among the nine members is a positive step towards increasing diversity and representation in the central bank’s decision-making process.
Regarding the issue of the Central Bank Digital Currency (CBDC), the UK has taken a cautious approach, with a decision on whether to issue a digital pound expected no earlier than 2025. However, the CBDC task force established in 2021 demonstrates the UK’s commitment to thoroughly assessing the strategic implications of adopting a digital currency.
Breeden’s appointment comes at a critical juncture, where financial institutions and regulators are closely monitoring the cryptocurrency and stablecoin markets. In April, the UK closed a consultation on proposed crypto rules and passed a markets bill into law, granting the Bank of England more authority to regulate the crypto space. The central bank is also expected to provide further clarity on the regulation of systemic stablecoins that may pose risks to financial stability.
Breeden’s expertise and background in financial stability, markets, and climate change make her a credible choice for this important position.