Reforms mean bankers could be jailed for 'reckless misconduct'
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.
Frequently Asked Questions about this Article…
The government backed a set of parliamentary commission recommendations aimed at improving banking standards, including cultural reform, tighter rules on conduct and pay, and measures to make senior bankers more accountable after the financial crisis and recent scandals.
Yes — the government plans to make 'reckless misconduct for senior bankers' a criminal offence, and those found guilty could face jail as a deterrent against risky decisions that might trigger taxpayer-funded bailouts.
Reforms aim to restore trust and stability in the banking system, which can support economic recovery, encourage banks to lend more to businesses, reduce systemic risk and help protect investors and taxpayers from the fallout of reckless bank decisions.
In response to trading scandals and high pay, the government wants tighter rules on conduct and pay to make executives more accountable and discourage behaviour that could harm the bank or require government rescue.
According to the proposals, reckless misconduct refers to senior executives making business decisions that risk giant losses for a bank — losses that could lead to government bailouts — and the criminalisation is intended to increase accountability.
The government says it hopes a stronger, safer and more stable banking system will increase lending to businesses, spur growth and create jobs, although the measures are intended to strengthen standards first to enable that outcome.
A combination of the financial crisis, a string of trading scandals, continued high pay for some bankers and public anger led the government to seek ways to hold individuals accountable and improve conduct and culture in banks.
Lawmakers want legislation that makes financiers more cautious about bank strategy and investments by increasing personal accountability — including potential criminal charges for reckless misconduct — to ensure those who run banks are fully accountable for bad decisions.
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