Britain needs a “radical” overhaul of its scandal-plagued banking sector as well as the introduction of new laws that will make it possible to jail bankers for “reckless misconduct” and force bankers to wait up to 10 years to receive their bonuses, said the UK’s Parliamentary Commission on Banking Standards on Tuesday.
In its long awaited report on banking reforms, the Commission, set up last year after a number of scandals involving the industry, said “too many bankers, especially at the senior levels, have operated in an environment with insufficient personal responsibility.”
“Senior executives were aware that they would not be punished for what they could not see and promptly donned the blindfolds.”
The Commission said senior bankers should be assigned clear personal responsibilities, with the legal onus on them to show they have done all that is reasonably required, and recommended a new criminal offence of “reckless misconduct in the management of a bank” which would carry a jail sentence for the most serious cases.
"Senior bankers who seriously damage their banks or put taxpayers' money at risk can expect to be fined, banned from the industry, or, in the worst cases, go to jail," said Andrew Tyrie, chairman of the Commission, adding that drastic reforms were the only way to restore trust in banks.
The reputation of Britain's banking sector has been damaged in recent years by a string of scandals, including Libor rate-rigging, credit insurance mis-selling, and controversy over staff behaviour and bonuses in the run-up to the 2008 global financial crisis
"Taxpayers and customers have lost out. The economy has suffered. The reputation of the financial sector has been gravely damaged. Trust in banking has fallen to a new low,” said the report.
The Commission also recommend giving regulators new powers to defer remuneration for bankers for up to 10 years, in order to "reflect the longer run balance between business risks and rewards". "It is not just bankers that need to change. The actions of regulators and governments have contributed to the decline in standards," Tyrie said.
The UK Chancellor is expected broadly to endorse the Commission’s findings, calling the report a “very impressive piece of work.”
“The Government publicly welcomes the commission’s recommendations on increased personal responsibility, especially at a senior level, increased professional judgment by regulators and better functioning markets. We will now get on with a swift response and will report before the summer recess,” said a spokesman for the Treasury.