BANKERS WHO ENGAGE in reckless misconduct or who put taxpayers’ money at risk should, in the worst cases, go to jail, according to a report by a parliamentary commission in the UK.
A long-awaited report on the future of banking has recommended radical reforms and more stringent penalties for bankers in the wake of a number of scandals in the UK.
These include the rigging of the Libor inter-bank lending rate, and previously the mis-selling of payment protection insurance – scandals which have cost billions of pounds.
The cross-party Parliamentary Commission on Banking Standards has also recommended that Royal Bank of Scotland, Ulster Bank’s parent company, be split into a good and bad bank as the UK Exchequer attempts offload its majority stake in the rescued institution.
Recently it was suggested that the troubled Ulster Bank division could be sold to the Irish government.
“The loss of trust in banking has been enormously damaging; there is now a massive opportunity to reform banking standards to strengthen the value of banking in the future and to reinforce the UK’s dominant position within the global financial services industry,” the report says.
Chancellor George Osborne’s annual Mansion House speech to business leaders is expected to address the commission’s report and outline the government’s privatisation plans for RBS and another state-owned bank Lloyds – both rescued at the height of the financial crisis.
The commission has said that senior bankers must be made personally responsible for malpractice – with a new criminal offence of reckless misconduct carrying a prison sentence.
Committee chairman, the Conservative Andrew 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.”
Also under the proposals, more remuneration would be deferred for longer periods of up to 10 years, in order to “reflect the longer run balance between business risks and rewards”.
Pay and pension rights could also be cancelled if a banker misbehaves or the bank has to be bailed out. Another recommendation is that banks should be legally required to put their financial safety ahead of the interests of shareholders.