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Commission calls for jail for reckless bankers
by Michelle Abrego on Jun 19, 2013 at 07:49
MPs have outlined recommendations to curb bankers bonuses, make reckless misconduct in bank management a criminal offence and reinforce regulatory powers in its report on banking standards.
The Parliamentary Commission on Banking Standards has published its seven-volume final report, Changing banking for good, following months of hearings with senior banking officials and regulators to reform the governance of banks and raise standards.
The key recommendations include a new remuneration code, a senior persons regime to replace the approved persons regime, a new criminal offence of reckless misconduct in bank management and greater regulatory powers.
Andrew Tyrie (pictured), chairman of the commission, said: ‘A lack of personal responsibility has been commonplace throughout the industry. Senior figures have continued to shelter behind an accountability firewall.
‘Risks and rewards in banking have been out of kilter. Given the misalignment of incentives, it should be no surprise that deep lapses in banking standards have been commonplace.’
The commission proposed that bonuses should be awarded in forms that favour the long-term performance and soundess of banks, and should be cancelled in light of misconduct that could require direct taxpayer support.
It said: ‘Many bank staff have been paid too much for doing the wrong things, with bonuses awarded and paid before the long-term consequences become apparent.
‘The potential rewards for fleeting short-term success have sometimes been huge, but the penalties for failure, often manifest only later, have been much smaller or negligible.’
Much of the recommendations focus on making ‘individual responsibility a reality’, such as a senior person’s regime which will be accompanied by a licensing regime to apply to all bank staff whose actions could seriously harm the bank.
Tyrie said: ‘Under our recommendations, 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. That has not been the case up to now.
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