UK Lawmakers Call For 'Reckless' Bankers to Face Jail

 

Published: Wednesday, 19 Jun 2013 | 1:43 AM ET

Britain should introduce laws making it possible to jail "reckless" bankers and claw back past bonus and pension

awards, an influential panel of lawmakers said on Wednesday.

The Parliamentary Commission on Banking Standards, set up by the government last year after Barclays was fined

over the manipulation of global interest rate benchmarks, said deep lapses in standards had been commonplace and recent scandals had exposed "shocking and widespread malpractice".

 "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," the commission's chairman Andrew Tyrie said in a 500-

page report.

 

The cross-party group, which includes former British finance minister Nigel Lawson and Justin Welby, head of the Anglican church, recommended senior bankers are held personally responsible and regulators granted greater powers.

(Read More: UK Bank Chief Asks to Be Stripped of Knighthood )

 

The commission is recommending 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 Tyrie.

 

The commission recommended the industry's 'approved persons' regime be scrapped and replaced with two new registers - one for senior bankers and one for other bank employees. It said the new system would ensure the most important responsibilities within banks were assigned to specific individuals.

 

The 'Senior Persons Regime' would enable those responsible for failures to be identified more easily and provide a stronger basis for action to be taken against them, the report said.  On pay, the commission recommended that the industry adopt a new remuneration code to better balance risk and reward with more pay deferred over longer periods of time.

 

The regulator would be granted a new power enabling it to cancel all bonuses and pension rights not yet paid out to senior executives in the event of their banks needing taxpayer support.

 

There was a political outcry when Fred Goodwin, the former chief executive of Royal Bank of Scotland left the bank after it was rescued by the government with a 703,000-pound annual pension, worth almost 17 million pounds. He later agreed to take a 2.7 million-pound lump sum and 342,500 pounds a year.

 

(Read More: EU Moves Closer to Imposing Caps on Banker Bonuses )

 

Britain's finance ministry welcomed the recommendations and said it would make a formal response in the next month.

"Where legislation is needed we have said we will support it and the banking bill currently before parliament can be amended to ensure they are quickly enacted," it said.

 

The Financial Conduct Authority, the new financial services industry regulator, said it was "learning from the regulatory mistakes of the past", having taken over the regulation of UK banks in April.

 

RBS Break-Up?

 

The commission also urged the government to immediately consider a range of strategies for what it should do with Royal Bank of Scotland (RBS), which has been 81 percent state-owned since its bail-out in 2008, including a possible break-up.