Commission
led by Andrew Tyrie recommends jailing bankers for 'reckless misconduct' and
enforcing a wait for bonuses
The Guardian, Jill Treanor, city editor, Wednesday 19 June 2013
 |
| The proposals come ahead of George Osborne’s crucial Mansion House speech to the City on Wednesday. Photograph: Tim Ireland/PA |
George Osborne is facing pressure to radically overhaul Britain's banks by introducing
a new law to jail bankers for "reckless misconduct" and force bankers
to wait up to 10 years to receive their bonuses.
The
proposals, among the key measures recommended in a major report by the parliamentary
commission on banking standards, also include a call on him to consider
breaking up the Royal Bank of Scotland. They come ahead of the chancellor's
crucial set-piece Mansion House speech to the City on Wednesday night.
The
chancellor is urged to restore confidence in the financial system by making top
bankers more accountable for their actions in the wake of the 2008 bank
bailouts, the Libor rigging scandal, and the shoddy treatment of customers
mis-sold payment protection insurance.
The senior
Conservative MP Andrew Tyrie, who led the commission, said the 80 or so
recommendations were intended to "change banking for good". They also
include giving regulators new powers to halt bonus payouts and pensions for
bosses of any banks that have to be bailed out by the taxpayer in the future.
"It is
not just bankers that need to change. The actions of regulators and governments
have contributed to the decline in standards," Tyrie added.
Set up in
the wake of Barclays' £290m fine for rigging Libor a year ago and counting
former chancellor Lord Lawson and the Archbishop of Canterbury Justin Welby
among its members, the commission also uses its 550-page report to call for:
• A revamp
of the way bankers are authorised to work in the City and to make top bankers
more accountable after so few of them were sanctioned following the 2008
banking crisis.
• An audit
of the number of women on trading floors, on the grounds that employing more
female traders could reduce risk.
• New
measures to foster high street competition, including an investigation into
whether bank accounts numbers can be made portable in the same way as mobile
phone numbers.
• Giving
everyone a right to a simple bank account.
• And an
overhaul of the "court" of the Bank of England, giving it a new board
of directors.
The
Treasury is ready to make amendments to the finance bill to adopt the
recommendations. It consulted last year on the possibility of criminal
sanctions for directors of failed banks but has yet to publish its conclusions.
In the
past, the commission's report said, top bankers had "donned
blindfolds" as they knew they could not be punished for wrongdoings they
could not see. When they could "not claim ignorance, they fell back on the
claim that everyone was party to a decision ... the Orient Express
defence".
The report,
which will be supplemented today by seven more hefty volumes, reopens the
debate about the future of 81% taxpayer-owned RBS by calling on Osborne to
review, by September, whether it should be broken up into a good and bad bank.
Tyrie warned the government it may need to be "bold" on the future of
RBS and consider the merits of all options to break it up and sell it off,
including splitting it into a number of smaller banks in order to boost
competition on the high street.
"The
current state of RBS creates problems for banking competition and for the
British economy. Further restructuring may well be needed. The government may
need to be bold," Tyrie said.
"Political
considerations must be put to one side," and parliament needed to be told
of any "insuperable" obstacles to a break up.
Osborne is
expected to use his Mansion House speech today to signal a sell off the
government's 39% stake in Lloyds Banking Group but he is not thought likely to
endorse the idea by the cross-party commission to shut down UK Financial
Investments, the body set up to look up after the taxpayers' stakes in the
bailed-out banks.
The
commission described UKFI as a "fig leaf" to hide political
interference by the chancellor, who yesterday insisted he had not personally
forced Stephen Hester to resign as boss of RBS last week to clear the way for
the bank's privatisation.
The
commission, though, said the government had interfered in the running of both
bailed-out banks. "On occasions it has done so directly, on others it
appears to have acted indirectly, using UKFI as its proxy," the report
said.
Osborne is
also facing pressure from business secretary Vince Cable to back away from any
quick sale of RBS while Ed Balls, the shadow chancellor, is telling him to
"resist the temptation for a loss-making fire sale". Balls said:
"The government must look at the whole range of options for the future of
RBS to ensure the taxpayer gets its money back and there is no return to
business as usual."
The report
does not recommend a full-blown competition investigation into the banking
industry, which is dominated by the big four of RBS, Lloyds, Barclays and HSBC
– an option that Cable is thought to regard as important.
Pat
McFadden, a Labour MP who sat on the commission, said: "Our report is
about tackling the cultural and standards failings in banks. From running
unacceptable risks with other people's money to PPI mis-selling, money
laundering and Libor interest rate rigging, these failings have been a betrayal
of the taxpayers who bailed out the banks and the majority of good honest
people who work in the industry."
A Treasury
spokesman described the report as "very impressive", saying:
"The government publicly welcomes the commission's recommendations on
increased personal responsibility especially at a senior level, increased
professional judgment by regulators and better functioning markets. We
will report before the summer recess."
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