How to jail bankers

 

The parliamentary commission on banking standards believes that banks let us down so comprehensively in the boom years that led to the great crash that what's required is a complete cultural overhaul.

And that, in turn, needs one reform that is simple to understand but really hard to put into practice - bankers need to be clear about their responsibilities and held properly to account when things go wrong.

To to achieve that, it recommends:

1) a whole new regulatory system for licensing or approving bankers

2) financial incentives, bonuses, that are dished out over as long as ten years and are easy to cancel when things go wrong

And 3) a new criminal offence of managing a bank recklessly.

The commission is in a sense responding to public unease that no one responsible for the banking meltdown has gone to prison, and the failed, discredited bankers remain very wealthy.

But it is more than that. The Lords and MPs on the commission want banks and bankers that take a long term view and don't take dangerous risks in the pursuit of big rewards.

There is, of course, a danger in setting much higher standards of conduct for bankers than for other business people - which is that few in their right minds might choose banking as a career.

 
Robert Peston Article written by Robert Peston Robert Peston Economics editor

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  • rate this
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    Comment number 211.

    It is time to stop banker bashing. Bad bankers don't get bonuses they used to get a black bag and told to clear their desk. When Bob Diamond or Mervin King were before this committee they were the only intelligence in the room.

    When 10% plus of our working age population's only aspirtion was to progress from JSA to ICB these guys were delivering 35% of treasury revenues.

  • rate this
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    Comment number 210.

    I wonder if the politicians realise how popular they would be if they implemented the recommendations?

  • rate this
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    Comment number 209.

    The theory feels right. However this type of legislation needs to be more widely drafted such that it applies to anyone with undue/systemic influence over the economy. That would include ministers, MPs,, civil servants and regulators, perhaps even auditors and legal advisors and senior businessmen, for example BP (their dividend per-deep water was major income to pension funds) and its value loss.

  • rate this
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    Comment number 208.

    The Brits just can help it can they ? Instead of clear concise no wriggle room criteria they have to use a highly subjective word like "reckless". If it ever comes to a court case the lawyers will earn a fortune,at our expense, arguing whether it was or not. If your were on the board of a bank that was wiped out within 5 years of the event, you should be wiped out. Exec or non-exec, end of ...

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    Comment number 207.

    The prospectus sent to shareholders by the RBS board for their pre-bust rights issue was a false representation for gain as defined by section 2 of the Fraud Act 2006. It escapes me why they were not prosecuted for it. On second thoughts, being a cynic, it doesn't escape me at all.

 

Comments 5 of 211

 

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