Speculation is rising in the City and Whitehall that John Varley, the chief executive of Barclays, may be appointed as the next Governor of the Bank of England under a Conservative Government.
Stephen Green, the executive chairman of HSBC, is also regarded as a very strong contender.
The focus is falling on Mr Varley and Mr Green as senior bankers and officials believe that Mervyn King, the Bank’s Governor, may not serve his full term, which would end in 2013, and may stand down this year or next.
A potential replacement of the Governor would accompany the radical shake-up of the Bank and the Financial Services Authority that the Tories plan if they win the general election.
Many believe that the person who leads the enlarged Bank, which will take over responsibility for financial regulation from the FSA, should be a banker rather than an economist.
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Mr Varley and Mr Green are seen as credible candidates for the job after steering their banks through the financial crisis without having to rely on any Government bailouts. Both are thought to be open to discussing the enlarged job that the Governor will face, being responsible for monetary policy and financial regulation.
Mr Varley is seen as the more likely of the two, as many believe that he is thinking of moving on from Barclays after five years at the helm. There is also an obvious successor for the top job at Barclays in Bob Diamond, who missed out on the chief executive’s position when Mr Varley got it in 2004.
If David Cameron were to replace Mr King, whose position is independent, it would send shock waves through the market. Mr King has been supportive of several Conservative ideas, including the need to look at a potential division of “casino” investment banks and narrow banks. Any talks about his replacement by the Tories would be seen as very sensitive.
A Tory insider said that it was “complete rubbish” that the party has held discussions with Mr Varley or others about taking over at the Bank. The source added that the party was focused on fighting the election campaign and has not started to make detailed plans about how to implement its showcase plan to bring sweeping reform to the financial system.
Others said that George Osborne, the Shadow Chancellor, and Mr King had a close and positive relationship.Appointing Mr Varley, a Conservative supporter, as Governor would be seen as highly controversial by some who believe that Barclays only escaped having to be bailed out because it failed to buy ABN Amro at the height of the credit bubble in 2006.
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Royal Bank of Scotland trounced Barclays in the bidding battle for the Dutch bank and is now 84 per cent owned by the taxpayer.
Mr Varley is also not universally liked among institutional investors, who have not forgiven him for raising money in the Middle East to recapitalise the bank rather than performing a traditional rights issue.
Mr Green is a less controversial character. But some believe that as the entire financial system had to be saved with public interventions, no banker should be appointed to police banks.
Barclays and HSBC declined to comment.
Some believe that Mr King’s replacement may come from a different direction, with either Paul Tucker, the Deputy Governor, stepping up, or Lord Turner, chairman of the Financial Services Authority, moving across.