Five questions answered on the new banking reforms

Are we right to jail reckless bankers?

The government has today said it will back most of the recommendations made by the Parliamentary Commission for Banking Standards (PCBS). We answer five questions on the plans for reform.

What key recommendations is the government planning on implementing?

The key changes are:

There will be a new criminal offence of reckless misconduct by top bankers resulting in a possible jail sentence.

If a bank has been bailed out bankers bonuses could be repayable. Bonuses are also to be deferred by up to 10 years.

If any bank breaks any rules, the burden of proof shall lie with the relevant senior bankers to show that they took all reasonable steps to stop it happening.

What recommendations are the government not taking up?

The government did not agree to employ a much tougher leverage ration for banks, limiting the total amount of loans and investments a bank can make relative to the amount of capital the bank holds in order to absorb losses on those assets.

This would ultimately toughen limits on banks’ risk taking.

Chancellor of the Exchequer, George Osborne, has decided instead to stick to the lower level agreed and set out by the Bank for International Settlements in Basel.

The government has also refused to abolish its holding company for its stakes in Royal Bank of Scotland and Lloyds Banking Group, called UK Financial Investments. It said: "UKFI is staffed by highly expert professionals with extensive experience in the banking sector".

What else has Osborne said?

Today he said: “The government is determined to raise standards across the banking industry to create a stronger and safer banking system.

“I am pleased to say that the government will implement its main recommendations. Where legislative changes are required we will amend the Banking Reform Bill which is currently before Parliament.

“Cultural reform in the banking sector marks the next step in the government’s plan to move the whole sector from rescue to recovery and ensure that UK banks demonstrate the highest standards, and are able to support business and drive economic growth.”

What other changes will be made?

The Prudential Regulation Authority, which is responsible for ensuring excess risks do not build up within the banking system, will be given an extra job of ensuring competition among banks.

Is the government considering any changes in the way the Royal Bank of Scotland is handled?

The government did say it would consider the PCBS’s suggestion of splitting the Royal Bank of Scotland into a ‘good’ high street bank - that can be quickly sold back to the private sector – and a ‘bad’ bank which should be kept and existing problematic loans worked out. 

Guests listen to speeches at the "Lord Mayor's Dinner to the Bankers and Merchants of the City of London" at Mansion House on June 19, 2013. Photograph: Getty Images.

Heidi Vella is a features writer for Nridigital.com

Photo: André Spicer
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“It’s scary to do it again”: the five-year-old fined £150 for running a lemonade stand

Enforcement officers penalised a child selling home-made lemonade in the street. Her father tells the full story. 

It was a lively Saturday afternoon in east London’s Mile End. Groups of people streamed through residential streets on their way to a music festival in the local park; booming bass could be heard from the surrounding houses.

One five-year-old girl who lived in the area had an idea. She had been to her school’s summer fête recently and looked longingly at the stalls. She loved the idea of setting up her own stall, and today was a good day for it.

“She eventually came round to the idea of selling lemonade,” her father André Spicer tells me. So he and his daughter went to their local shop to buy some lemons. They mixed a few jugs of lemonade, the girl made a fetching A4 sign with some lemons drawn on it – 50p for a small cup, £1 for a large – and they carried a table from home to the end of their road. 

“People suddenly started coming up and buying stuff, pretty quickly, and they were very happy,” Spicer recalls. “People looked overjoyed at this cute little girl on the side of the road – community feel and all that sort of stuff.”

But the heart-warming scene was soon interrupted. After about half an hour of what Spicer describes as “brisk” trade – his daughter’s recipe secret was some mint and a little bit of cucumber, for a “bit of a British touch” – four enforcement officers came striding up to the stand.

Three were in uniform, and one was in plain clothes. One uniformed officer turned the camera on his vest on, and began reciting a legal script at the weeping five-year-old.

“You’re trading without a licence, pursuant to x, y, z act and blah dah dah dah, really going through a script,” Spicer tells me, saying they showed no compassion for his daughter. “This is my job, I’m doing it and that’s it, basically.”

The girl burst into tears the moment they arrived.

“Officials have some degree of intimidation. I’m a grown adult, so I wasn’t super intimidated, but I was a bit shocked,” says Spicer. “But my daughter was intimidated. She started crying straight away.”

As they continued to recite their legalese, her father picked her up to try to comfort her – but that didn’t stop the officers giving her stall a £150 fine and handing them a penalty notice. “TRADING WITHOUT LICENCE,” it screamed.


Picture: André Spicer

“She was crying and repeating, ‘I’ve done a bad thing’,” says Spicer. “As we walked home, I had to try and convince her that it wasn’t her, it wasn’t her fault. It wasn’t her who had done something bad.”

She cried all the way home, and it wasn’t until she watched her favourite film, Brave, that she calmed down. It was then that Spicer suggested next time they would “do it all correctly”, get a permit, and set up another stand.

“No, I don’t want to, it’s a bit scary to do it again,” she replied. Her father hopes that “she’ll be able to get over it”, and that her enterprising spirit will return.

The Council has since apologised and cancelled the fine, and called on its officials to “show common sense and to use their powers sensibly”.

But Spicer felt “there’s a bigger principle here”, and wrote a piece for the Telegraph arguing that children in modern Britain are too restricted.

He would “absolutely” encourage his daughter to set up another stall, and “I’d encourage other people to go and do it as well. It’s a great way to spend a bit of time with the kids in the holidays, and they might learn something.”

A fitting reminder of the great life lesson: when life gives you a fixed penalty notice, make lemonade.

Anoosh Chakelian is senior writer at the New Statesman.