LONDON – The British government Monday pledged to jail bankers found guilty of reckless misconduct, backing a recommendation contained in a report written by a panel of cross-party lawmakers.
The Parliamentary Commission on Banking Standards, established by the coalition government after the Libor rate-rigging scandal last year, published its findings in June.
Its report, entitled “Changing Banking for Good,” called for senior bankers accused of carrying out professional responsibilities in a reckless manner to face possible prison time.
Giving its formal response, the Conservative-Liberal Democrat government led by Prime Minister David Cameron said in a statement: “The behavior of some in the financial services industry has damaged the reputation of an industry that employs hundreds of thousands of people and is vital to our economic prosperity. We today set out plans to implement the major recommendations of ‘Changing Banking for Good,’ including . . . the introduction of a criminal offense for reckless misconduct by senior bank staff.”
The statement, signed by finance chief George Osborne, a Conservative, and Business Minister Vince Cable of the Liberal Democrats, also backed moves to claw back bonuses handed to staff at state-rescued banks and to defer future bonuses for up to 10 years. The pair said the coalition will seek to “enhance the soundness and stability of the banking sector” and “address the problems with standards which have done so much to undermine society’s faith in the banking system.”
The government also plans to set up a new banking standards regime governing the conduct of bank staff, and take more steps to improve competition within the British banking sector.
It will also review the case for splitting the state-rescued Royal Bank of Scotland into a so-called good bank and bad bank, in line with the report’s conclusions.
The commission was formed last year after revelations that staff at Barclays bank tried to manipulate the Libor rate, which is used as a benchmark for global financial contracts worth about $300 trillion. Barclays has been heavily fined over the affair.
The reputation of Britain’s banking sector has been damaged in recent years by a string of scandals, including also credit insurance mis-selling and ongoing controversy over staff behavior in the runup to the 2008 global financial crisis.