The Parliamentary Commission on Banking Standards has recommended that bankers guilty of reckless misconduct face prison sentences, in a report that has been welcomed by the Treasury.
The report proposes measures to address concerns regarding the insufficient personal accountability of bankers. Proposed measures included:
- A new set of banking standards, requiring banks to put financial safety ahead of shareholder profit.
- Senior bankers should have clear personal responsibilities, which disregarded could be punishable by a prison sentence.
- Bonuses could be witheld for up to ten years, with payouts linked to the long-term performance of the bank.
- Deferred pay and pension rights should be cancelled in cases of misconduct.
- Senior managers could lose deferred pay and pensions rights if the bank has to be bailed out.
The Treasury has called the report an ‘impressive piece of work’. A spokesman for the Treasury commented: ‘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’.
In general, reception of the report has been positive: Tom Gosling, head of PwC’s reward practice, has commented:
‘This is a hard-hitting report from the commission and it’s not surprising to see some high profile pay proposals. Overall, the pay proposals are sensible and the commission has avoided headline-grabbing but unworkable proposals.’
It remains to be seen, however, what results from the Commission’s proposals.