Mark Carney's announcement as the next replacement for Sir Mervyn King as governor of the Bank of England has both stunned and delighted the City.

The Canadian had previously ruled himself out of the running and will become the first foreign governor in the bank's 318-year history. The Bank's deputy governor, Paul Tucker, had been widely tipped to be anointed Sir Mervyn's successor.

The 47-year old former Goldman Sachs banker will serve a five-year term when he takes up the post in June 2013.

George Osborne said: 'Mark Carney is the outstanding central banker of his generation. He is unique amongst the potential candidates in combining long experience of central banking, huge international credibility in economics, deep expertise in financial regulation and a first-hand experience of private sector financial institutions'.

The current governor of the Bank of Canada will have a bigger remit than Sir Mervyn. Not only will he take charge of the Monetary Policy Committee but he will also chair the Financial Policy Committee - tasked with ensuring financial stability from next year.

Such extra burdens carry extra rewards. Carney will reap a salary of £624,000 - twice that of his predecessor. But he will not be enrolled in the Bank's generous pension scheme.

Carney, who has a Phd in economics, is widely credited with steering Canada through the worst of the global financial crisis. The North American country can also boast a rare statistic - not one of its banks had to be bailed out - unlike its British counterparts which sucked £1trn of public funds into its collapsing system.

Sir Mervyn said in a statement: 'He represents a new generation of leadership for the Bank of England, and is an outstanding choice to succeed me.'

Shadow chancellor Ed Balls, also welcomed the move, saying Carney was a 'good choice'.

Harvard-educated Carney is the youngest head of a central bank of any G8 country. He is expected to apply for British citizenship, although that is not a prerequisite of the job.

Carney told the Canadian press that the job was 'a major opportunity'.

'It's very important for the global economy that the UK does well, that it succeeds in the rebalancing of their economy, that the reform of the British financial system is completed,' he said.

'That precise number is likely to be a bit of a stretch but it does seem feasible that a major boost to capital investment on infrastructure could be a fillip to employment and thus be a driver of growth.'