Photograph by Chandres
The Parliamentary Commission on Banking Standards has produced its long-awaited report on the financial sector, which attacks the lack of accountability of bankers for their actions and said bonuses should be deferred for ten years to prove success.
The commission was set up by Chancellor George Osborne last year after a number of scandals rocked the financial industry in the UK and worldwide – from bailouts of RBS and Lloyds to LIBOR rate fixing.
The report criticized senior banking executives for operating with “insufficient personal responsibility” and claiming “ignorance” or group responsibility in order to avoid prosecution under current laws. The report recommends that senior bankers acting in a “reckless” manner should become a criminal offence including a possible prison sentence.
Whilst the report did not support capping bankers’ bonuses, it recommends that they should be linked to long-term performance and deferred for up to 10 years, to avoid bonuses for failure which continued throughout the 2008 financial collapse. The report goes on by recommending that these deferred bonuses along with pension rights should be cancellable if a banker misbehaves or the bank needs to be bailed out.
The committee criticized the financial regulators for not noticing the build up of risks prior to the financial collapse in 2008, and said that senior regulators should be personally accountable to Parliament for overseeing the banking sector.
The report also repeated its demand to allow regulators to set a more conservative leverage ratio for banks, mmuch higher than the 3% required under international standards, in order to avoid such a similar build up of risk in the future.
The Treasury welcomed the report and promised to provide a response before the summer recess.
