Last month was not the first time that Callum McCarthy has seen his name splashed across the nationals with an unofficial announcement that he was to become the head of a UK regulator. His ascension to the top job at energy watchdog Ofgem in late September 1998 had already been leaked to the press by mid-August of that year.
This time around, the Treasury barely had time to run an official internal memo over to the FSA before the press had already announced McCarthy was to replace Howard Davies as the next chairman of the financial services watchdog.
The banking and public sector virtuoso, who will take the FSA post in September this year, is an old hand when it comes to financial services, public policy and regulation. He spent 13 years in the DTI in the 70s and 80s, working his way up to principal private secretary for Roy Hattersley and Norman Tebbit.
In 1985, he went to work as a director with investment bank Kleinwort Benson before being headhunted by former Barclays investment bank BZW in 1989 with a mandate to strnegthen its corporate finance. Although meeting with limited success in this role, he was nonetheless promoted in 1993 to the top job at Barclays' Japanese operations, followed by two years as regional chief executive of the North American operations of BZW.
His career returned to the public sector when he took the head job at gas regulator Ofgas in 1998 and then heading the joint energy regulator in early 1999 when electricity regulator Offer joined with Ofgas to become Ofgem.
His crowning achievement as head of Ofgem was the creation and implementation of the industry's long awaited post-deregulation pricing mechanism Neta (new electricity trading arrangements) system, which dramatically drove down the wholesale price of electricity by 40 per cent.
As the UK's energy Tsar for the past four years, McCarthy has gained a reputation as a bit of a hard case, not afraid to go head to head with big industry players or Whitehall to defend his patch. During last year's collapse of British Energy, when energy minister Brian Wilson took the suffering company's side by calling for a relaxation of Neta rules, McCarthy stood his ground, refusing to relax regulation.
When Wilson took a back-handed swing at McCarthy, saying “We need to address the unfortunate reality that British Energy cannot get a price for its product that is reasonable,” McCarthy's reaction was to say: “This is a commercial market and, as in all markets, companies will fail – it's as simple as that.”
But McCarthy's attitude is not just founded on self-confidence. His high-level New Labour contacts are impressive and many commentators agree this is part of the reason he was able to stand firm in the face of Wilson. His relationship with No 10 became evident when, while heading BZW's North American operations in 1997, he was able to secure Tony Blair for a Wall Street “get to know you” soon after the election.
W hen Howard Davies leaves the FSA chair this September, McCarthy will be met with structural changes that see Davies' old role split in two. Whereas Davies served in the capacity of both chairman and chief executive, McCarthy will be supported by a separate CEO. This will leave him free of the day-to-day mechanics to concentrate on high-level planning and providing a figurehead for the industry.
This may prove to be a more effective management structure, especially in terms of dealing with European issues which Davies and the FSA has been criticised for neglecting. As recently as last December, the FSA was reported to the European Commission over allegations that it had not complied with European insurance directives.
With McCarthy taking the helm of the FSA, some could see his past actions as evidence of tougher times ahead for financial services but others may argue that McCarthy's experience will see a more methodical approach to financial services regulation.
Although his record shows him to be a firm regulator, not afraid to take the side of the consumer, he also endorses a strong pro-competition doctrine, believing a competitive market is the best governor of an industry.
One of his first priorities as FSA chairman will be to get a handle on the definition of misselling, which the FSA has failed to deliver. His track record in regulation development and enforcement means in all probability that he will produce an intellectually rigorous set of definitions and then rigidly stick to them.
Former colleagues of McCarthy believe he brings exactly the right regulatory philosophy and managerial skills needed for the job. One says: “McCarthy won't over-regulate. He will try to leave things to the market and he understands that, as a regulator, you must not try to run businesses. He does not like people who don't know what they're talking about. McCarthy will know how to see the wood for the trees, sorting out the real issues.”
An FSA chairman who can target the right issues is what many commentators see as crucial in the present climate. One industry personality says: “McCarthy will need to get a handle on things quickly. We need to get systems in place that can cope with the industry's present problems before they get further out of hand.”
Born: February 29, 1944
Education: BA from Oxford, PhD in economics from Stirling,MS from Stanford.
Career to date: 1965-72 – ICI economics and operations researcher. 1972-85 – DTI, including time as principal private secretary to Roy Hattersley and Norman Tebbit. 1985-89 – director of corporate finance at Kleinwort Benson. 1989-93 – deputy head of corporate finance at BZW. 1993-96 – chief executive, Japanese operations, Barclays Bank. 1996-98 – regional chief executive, North American operations, BZW. 1998-2003 – head of Ofgem (initially, head of Ofgas before the 1999 merger of Ofgas and Offer).
Life ambition: It has been reported by the Sunday Telegraph that McCarthy has long been seeking a knighthood.
Dislikes: Ministers who don't back their industry body.
Peers say: “He has very strong analytical skills and is a great sceptic. He is someone who knows spin when he sees it.”