The Chancellor, George Osborne, has made 86 amendments to the Treasury’s Banking Reform Bill, some of which mean that senior bankers could face criminal charges for “reckless” misconduct leading to the fall of a bank.
The changes, which will come into effect in 2014, include laws separating the high street banks from their trading arms in the City in a bid to protect taxpayers and have partly been made in response to the Libor rigging scandal, when traders at some banks sought to manipulate interest rates in their favour.
According to a Treasury statement, senior managers could be liable if they take a decision that leads to the failure of the bank, or fail to take steps available to them to prevent such a decision being taken.
The offence will only apply to behaviour that falls far below the standard that could reasonably be expected of a person in that position, which is similar to the test for corporate manslaughter. According to the Treasury, these amendments mark the final part of the Government’s plan for the biggest ever overhaul of the British banking system.
Mr Osborne pledged to introduce criminal penalties for reckless bankers in July in response to a landmark report by the Parliamentary Commission on Banking Standards. But the scale of the jail term was only disclosed yesterday (October 1).
Meanwhile, as part of a plan for the Bank of England to have new powers to “stress test” the UK’s financial services industry every year, bankers could be ejected from their roles if capital planning or governance falls short of required standards.
Other amendments to the Bill include making the UK’s financial regulators “sufficiently focused” on improving competition and giving them powers to tackle anti-competitive behaviour.