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Jail reckless bankers, standards commission urges Jail reckless bankers, standards commission urges
(about 2 hours later)
Senior bankers guilty of reckless misconduct should be jailed, a long-awaited report on banking commissioned by the government has recommended.Senior bankers guilty of reckless misconduct should be jailed, a long-awaited report on banking commissioned by the government has recommended.
The Parliamentary Commission on Banking Standards was set up by Chancellor George Osborne last year after a number of scandals involving the industry. The cross-party Parliamentary Commission on Banking Standards' fifth report said bankers should in future be accountable for their actions.
The cross-party group's fifth report attacked the lack of accountability of bankers and also said some bonuses should be withheld for up to 10 years. It also said some bonuses should be withheld for up to 10 years.
The Treasury has welcomed the report. The Treasury welcomed the report, calling it "a very impressive piece of work".
It called it "a very impressive piece of work" and promised to provide a response before the summer recess. It promised to provide a response before the summer recess.
"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," a spokesman added. The Commission was set up by Chancellor George Osborne last year after a number of scandals involving the industry.
The 571-page report also called on the government to review alternatives for selling off the Royal Bank of Scotland (RBS), including breaking it up, and demanded action to make the banking market more competitive.The 571-page report also called on the government to review alternatives for selling off the Royal Bank of Scotland (RBS), including breaking it up, and demanded action to make the banking market more competitive.
Criminal liabilityCriminal liability
"Too many bankers, especially at the most senior levels, have operated in an environment with insufficient personal responsibility," the report says. The robustly-worded report said: "Too many bankers, especially at the most senior levels, have operated in an environment with insufficient personal responsibility.
"Senior executives were aware that they would not be punished for what they could not see and promptly donned the blindfolds."Senior executives were aware that they would not be punished for what they could not see and promptly donned the blindfolds.
"Where they could not claim ignorance, they fell back on the claim that everyone was party to a decision, so that no individual could be held squarely to blame - the Murder on the Orient Express defence.""Where they could not claim ignorance, they fell back on the claim that everyone was party to a decision, so that no individual could be held squarely to blame - the Murder on the Orient Express defence."
The report advocated:The report advocated:
Shadow chancellor Ed Balls said the report offered a blueprint for the "radical change" needed. He said: "I hope the chancellor won't drag his feet. We need our banks working well in the future - this report shows us what to do." Shadow chancellor Ed Balls said the report offered a blueprint for the "radical change" needed. He said: "We need our banks working well in the future - this report shows us what to do."
And Liberal Democrat peer Lord Oakeshott, who backed the committee's findings, said: "Why are there no banged-up bankers? That's what most people want to know after the last five years of scandals and shame." Liberal Democrat peer Lord Oakeshott said: "Why are there no banged-up bankers? That's what most people want to know after the last five years of scandals and shame."
On the recommendation of deferring bonuses for up to 10 years, former RBS chairman and chief executive Sir George Mathewson told the BBC: "I find that a little strange. If you are going to have bonuses, they are to incentivise behaviours. Ten years out is not an easy way to imagine incentivisation occurring." However, former RBS chairman and chief executive Sir George Mathewson questioned the plan to defer bonuses for 10 years.
He told the BBC: "I find that a little strange. If you are going to have bonuses, they are to incentivise behaviours. Ten years out is not an easy way to imagine incentivisation occurring."
'Male-dominated''Male-dominated'
The report called for more to be done to boost competition among banks, including two further investigations.The report called for more to be done to boost competition among banks, including two further investigations.
One, by a government panel of experts, would look at how to make it easier for people to transfer their bank accounts, while the other would be a full investigation of retail banking and small business lending by the Competition and Markets Authority. One, by a government panel of experts, would look at how to make it easier for people to transfer their bank accounts, while the other would be a full investigation of retail banking and small business lending by the Competition and Markets Authority (CMA).
The CMA is due to be launched next April, and will replace the Office of Fair Trading (OFT) and the Competition Commission.
Following the publication of the Parliamentary Commission's report, the OFT said it was "bringing forward" an inquiry into the provision of banking services to small and medium-sized businesses.
"Our review of SME banking is part of an ongoing planned programme of work in this area to allow the Competition and Markets Authority to decide whether or not to make a market investigation reference by 2015," said OFT chief executive Clive Maxwell.
Consumer watchdog Which? welcomed the proposals, saying it could herald "the big change in banking that consumers have been crying out for".Consumer watchdog Which? welcomed the proposals, saying it could herald "the big change in banking that consumers have been crying out for".
But the group said more needed to be done to change banking culture, and called for an independent code of conduct. But the group said more needed to be done to change banking culture and highlighted the male-dominated culture on trading floors, it said banks should be forced to take action if there was a significant imbalance.
The committee also criticised the male-dominated culture on trading floors, saying banks should be required to publish their gender ratios and take action where there is a significant imbalance.
On RBS, the committee only said that the government should formally consider alternative options for the nationalised bank by September.On RBS, the committee only said that the government should formally consider alternative options for the nationalised bank by September.
The report also called for an end to the government's purportedly "arms-length" ownership of RBS and Lloyds via the holding company UKFI - an arrangement set up under Gordon Brown and described as a "fig leaf" disguising the government's increasing interference in the running of the two banks, especially RBS.The report also called for an end to the government's purportedly "arms-length" ownership of RBS and Lloyds via the holding company UKFI - an arrangement set up under Gordon Brown and described as a "fig leaf" disguising the government's increasing interference in the running of the two banks, especially RBS.
'Special measures''Special measures'
The committee also criticised the failure of regulators to spot the risks building up in the financial system prior to 2008, demanding "the replacement of mechanical data collection and box ticking by a much greater emphasis on the exercise of judgement".The committee also criticised the failure of regulators to spot the risks building up in the financial system prior to 2008, demanding "the replacement of mechanical data collection and box ticking by a much greater emphasis on the exercise of judgement".
Senior regulators should be personally accountable, ultimately to Parliament, for their oversight of the banks. Senior regulators should also be personally accountable, ultimately to Parliament, for their oversight of the banks.
The report recommended that each bank's board should be required to institute procedures to protect whistle-blowers - employees who want to flag up misconduct to the regulators.The report recommended that each bank's board should be required to institute procedures to protect whistle-blowers - employees who want to flag up misconduct to the regulators.
The Financial Services Authority, which was the overall banking regulator up to and during the financial crisis, has been split into two separate units - the Financial Conduct Authority, which polices banker behaviour, and the Bank of England's Prudential Regulation Authority, which ensures the banks do not take excessive risks. The Financial Services Authority, the overall banking regulator up to and during the financial crisis, has been split into two separate units - the Financial Conduct Authority, which polices banker behaviour, and the Bank of England's Prudential Regulation Authority, which ensures the banks do not take excessive risks.
If either regulator spots a pattern of shoddy standards at a bank, the commission said that the two should be able to put the bank into "special measures", meaning the bank would be formally required to deal with any shortcomings identified in its general culture or systems. If either regulator spots a pattern of shoddy standards at a bank, the commission said that the two should be able to put the bank into "special measures".
The committee repeated its demand that the chancellor allow regulators to set a more conservative "leverage ratio" for the banks.The committee repeated its demand that the chancellor allow regulators to set a more conservative "leverage ratio" for the banks.
The leverage ratio is the minimum amount of loss-absorbing capital that a bank must hold, as a percentage of its total loans and investments.The leverage ratio is the minimum amount of loss-absorbing capital that a bank must hold, as a percentage of its total loans and investments.
Mr Osborne has said the limit should be set at 3%, in line with a new international requirement from the Basel committee of central bankers. But the committee has the figure should be much higher.Mr Osborne has said the limit should be set at 3%, in line with a new international requirement from the Basel committee of central bankers. But the committee has the figure should be much higher.