De Cos and Knot lead the race to succeed Lagarde, who says she is leaving the ECB because she cannot remain neutral

Former Spanish central-bank governor Pablo Hernandez de Cos, who now heads the Bank for International Settlements, is the frontrunner to take over the European Central Bank¹. Klaas Knot, former head of the Dutch central bank, is the other leading candidate^2,7. Both candidates have already been reaching out². Lagarde’s early exit has set off a contest that is already under way^2,8.

The contest is a two-horse race between two central banking pragmatists³. One EU diplomat, speaking on condition of anonymity, said Knot was seen as the preferred candidate⁸.

Lagarde explained that she is leaving early because she no longer wants to stay silent⁹. ‘I cannot remain neutral,’ she said⁹. She has said she will step down in early 2027, about eight months before the end of her term, setting off the succession race^8,10.

Why it matters to investors

The next ECB chief matters more for France than for rates^5,6. There are political wrinkles to either choice⁶.

Choosing de Cos would reopen the post of general manager of the Bank for International Settlements, which he took up last year^5,6. His style is low-key⁴. Both candidates come from national central banks, in Spain and the Netherlands^1,2. The BIS is often described as the central bankers’ central bank⁴.

Knot’s standing rests on his time running the Dutch central bank^2,7. The diplomat’s view that he is the preferred candidate⁸ contrasts with the description of de Cos as the frontrunner¹, so the race remains open between the two³.

What to watch

The first marker is the decision by EU leaders on a successor, which the early departure allows before Lagarde leaves^8,10. Lagarde is to step down in February⁷.

The second is the outreach both men have begun², and whether other names emerge in what is so far a two-horse race³. Both men are former national central bank governors^1,7.

The third is what Lagarde does with her freedom to speak. She has said she cannot remain neutral⁹, and her explanation for leaving is that she no longer wants to stay silent⁹. The succession will also be read for its effect on France⁵. A fourth marker is the BIS itself: if de Cos moves, its general manager post opens again^5,6.