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
    0

    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 ...

  • rate this
    0

    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.

  • rate this
    0

    Comment number 206.

    Here's the deal:

    To jail bankers for systemic fraud would mean they would have to called up in front of the beak.
    If there to be then the judge is likely to ask awkward questions - like "where did this money come from"?

    Now we all know where this would lead - so it plain ain't going to happen.

    And this is why unless there is pilfering then the guilty parties will get away scot free.

    For good..

  • rate this
    0

    Comment number 205.

    Right for the future but too late for the past. Also what about the millions being made by those tidying up their own mistakes. Further investigation to get to the truth is required. Leith Robertson at RBS designed own reward system at RBS for the mezz debt team & made millions as the bank lost a fortune. Donald Kerr & Adrian Walker lost HBOS millions AHO has promoted bothh at LBG.

  • rate this
    0

    Comment number 204.

    The threat of prison won't put the type of person who goes into those roles in banking off, they are by their nature inherently criminal. All for better controls and sanctions in the future, but what the politicians are missing is the real appetite of the general public is for repatriation of all the incorrectly paid bonuses in the past!

  • rate this
    0

    Comment number 203.

    Lively discussion?

    Remove anything that doesn't fit more like.
    Why is it always one way?
    There is stuff I don't like still up.

    Remember Murdoch hasn't taken over. Yet.

  • rate this
    0

    Comment number 202.

    Just a paper shuffling job that brings in new rules,that are there to be broken,were has the party of law & order gone
    What amazes me is that they can not see how that undermines there authority in all that they do

  • rate this
    0

    Comment number 201.

    200 agree - but the recent banking crises there are many laws that could have been brought to bear not least of whichthe companies act which allows for a wide range of penalties and under which directors are personally liable - i.e. there assets are at risk - and yet no detailed investigations/prosecutions progressed by law officers. In this environment I cannot see how more legislation helps.

  • rate this
    0

    Comment number 200.

    199 feedbackloop
    If you can not enforce regulations/laws then you have no regulation or law

  • rate this
    +1

    Comment number 199.

    As usual the politicians answer is more legislation. They dont even have the political will to bring forward proper investigations and prosecutions under the legislation we already have. What a farce.

  • rate this
    +1

    Comment number 198.

    @122
    Shareholders are not the only ones providing firms banks with the necessarily factors of production. Creditors and depositors also provide capital. And employees provide labour. Society provides infrastructure and other public goods
    And even if we believe that the market knows best, which market? Equity or debt market or labour market?
    Banks and officers owe duties to all these stakeholders

  • rate this
    0

    Comment number 197.

    I still contend that most of these self-styled bankers could be convicted under the Theft Act. It does not require new legislation: that is just a cop out by the lawyers.

    By the way have we heard anything more about the investigation into Fred the Shred by the Scottish authorities or is it being long-grassed?

  • rate this
    -1

    Comment number 196.

    194 Faux

    'Lets call this imaginary industry 'coal mining'.'

    No need to imagine. Just call the 'industry' Nu-Labour.

  • rate this
    0

    Comment number 195.

    "Govt is not hapless: it has legions of Civil Servants, can call on advice from anywhere, gets advice from everywhere ...
    ... and makes the rules, whether it's Amazon's & Google's tax to regulating this, that or t'other."

    Government is subjected to remorseless lobbying by highly paid firms getting laws changed to their advantage.

    Lobbyists got the City what it wanted. And then it utterly failed

  • rate this
    0

    Comment number 194.

    193 - lets just assume another industry had swallowed up hundreds of billions in direct/indirect support, QE, interest payments on loans to keep it afloat, and a global recession - as a direct result of incompetent risk management and greed.

    Lets call this imaginary industry 'coal mining'.

    Lets further imagine that the management insisted on vast salaries and bonuses despite nearly destroying UK

  • rate this
    +1

    Comment number 193.

    @188 & 191 Donkzilla

    So, what is wrong with:
    stealing nothing?
    doing your job well?
    breaking no laws?
    earning large sums?
    a regressive tax system?
    enjoying a bonus on top?

    Perhaps it is the one from last (perhaps the last one, too), both nothing to do with bankers & everything to do with politicians.

  • rate this
    0

    Comment number 192.

    No comment from Robert about anyone in their right mind working to a higher code,would be put off, because other business are more immoral at best corrupt at worse.
    So Robert are we to put up with bad practises because it attracts "intelligent"people,who will for fill such acts,no matter what
    Sound like you you need to look at your own moral compass,it doesn't mitigate their career choice

 

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