Jail reckless bankers, standards commission urges

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 group’s fifth report attacked the lack of accountability of bankers and also said some bonuses should be withheld for up to 10 years.

The Treasury has welcomed the report.

It called it “a very impressive piece of work” and 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 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.

“Too many bankers, especially at the most senior levels, have operated in an environment with insufficient personal responsibility,” the report says.

“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.”

The report advocated:

  • senior bankers should be assigned clear personal responsibilities, with the legal onus on them to show they have done all that is reasonably required
  • recklessly disregarding these responsibilities should be made a criminal offence – including a possible prison sentence
  • senior bankers – and anyone in a position to cause the bank serious harm, such as top traders – should adhere to a new set of banking standards set by regulators
  • pay for bankers should be deferred for up to 10 years, with the ultimate payout linked to the long-term performance of the bank and of the employee’s particular business area
  • deferred pay and pension rights should also be cancellable if a banker misbehaves, or – in the case of senior managers – if the bank has to be bailed out
  • banks should be legally required to put financial safety ahead of shareholder interests

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.”

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.”

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.”