The Government confirmed yesterday (July 8th) that it will support most of the recommendations produced by the Parliamentary Commission for Banking Standards, including a new criminal offence of reckless misconduct by top bankers, which could include a jail term.
In response to the Commission’s landmark report, Chancellor George Osborne also pledged to implement tighter controls for bankers’ bonuses but rejected a recommendation for the abolition of UK Financial Investments (UKFI), the body that handles the state’s holdings in the Royal Bank of Scotland and Lloyds Banking Group.
Mr Osborne said that the Government will implement nine changes of the 114 recommended by the report through legislation through amendments to the Banking Reform Bill, currently before Parliament, but added that many can be implemented without changes to the law.
For example, some can be carried out through existing regulators, such as the Prudential Regulation Authority (PRA), the new industry watchdog at the Bank of England, which regulates the biggest banks and insurance companies.
The PRA will be asked to look at ways of strengthening rules about blocking deferred bonuses and pensions of bailed-out bankers and at ways to make it easier to claw back bonuses and restrict signing-on fees when bankers move jobs.
In addition, the Chancellor said that he aims to increase choice in the industry by giving the PRA a secondary objective to improve competition, and by asking a new payments regulator, which has yet to be set up, to study how easy it is to switch accounts and consider if big banks should give up ownership of the payments systems.
The Commission, which was chaired by Conservative MP Andrew Tyrie, formerly a member of the Bank’s Monetary Policy Committee, was set up by Mr Osborne in the wake of the financial crisis and the Libor rate-rigging scandal.