Reforms mean bankers could be jailed for 'reckless misconduct'

The British government backed a set of recommendations on Monday to improve standards in the banking industry, including measures that could have bankers in Britain facing jail for poor business decisions.

Chancellor of the Exchequer George Osborne said the government would adopt the wide-ranging proposals presented last month by a parliamentary commission on banking standards.

Mr Osborne had asked the commission to come up with ways to improve the banking system and make banking executives more accountable for their actions after the financial crisis and a handful of recent banking scandals.

"The government is determined to raise standards across the banking industry to create a stronger and safer banking system," Mr Osborne said. "Cultural reform in the banking sector marks the next step in the government's plan to move the whole sector from rescue to recovery."

The steps are part of the government's efforts to restore trust in the banking sector as a way to support a recovery of the British economy. Mr Osborne said he hoped a more stable banking system would increase lending to businesses, spur growth and create more jobs.

A string of trading scandals and continued high pay for some of Britain's bankers have led to widespread public anger and prompted the government to look into tightening rules on conduct and pay.

"If we're to get our economy back on track, we need to get the banking system back on track first," said Vince Cable, the secretary of state for business.

The government plans to make "reckless misconduct for senior bankers" a criminal offence. Those found guilty could face jail.

The step would be "a helpful deterrent" against senior executives risking giant losses at banks that would result in a government bailout and cost the taxpayer billions of dollars, officials say.

British lawmakers said the legislation is aimed at making financiers more cautious when deciding on the bank's strategy and investments.

"It is important to ensure that those who run banks are fully accountable," the government said in its response to the commission's recommendations.

The financial crisis highlighted a lack of effective means to hold individuals to account for bad decisions, the government said.