The Parliamentary Commission on Banking Standards, set up by Chancellor George Osborne, has today released a report on the banking system. We answer five questions on the reports recommendation.
What are the main findings of the report?
The fifth report from the commission, which was established last year in response to a number of scandals involving the banking industry, recommended that senior bankers guilty of reckless misconduct should be jailed.
It also lambasted the lack of accountability of bankers and recommended that some bonuses should be withheld for up to 10 years.
“Senior executives were aware that they would not be punished for what they could not see and promptly donned the blindfolds.
“Where they could not claim ignorance, they fell back on the claim that everyone was party to a decision, so that no individual could be held squarely to blame – the Murder on the Orient Express defence,” the report said.
What other recommendations does the report make?
It called on the government to review alternatives for selling off the Royal Bank of Scotland (RBS) and said there should be more action to make the banking market more competitive.
Other recommendations were that banks should be legally required to put financial safety ahead of shareholder interests.
Senior bankers should be assigned clear personal responsibilities, with the legal onus on them to show they have done all that is reasonably required.
Deferred pay and pension rights should also be cancellable if a banker misbehaves, or – in the case of senior managers – if the bank has to be bailed out.
Did the report say anything about banking culture?
Yes. It suggested banks should publish their gender ratios and take action when there is an imbalance. It attacked the male-dominated culture on trading floors.
It also said there should be an independent code of conduct for bankers and more needs to be done to change banking culture.
What has the government said about the report?
The called it an “impressive piece of work” and have vowed to respond to the report before the summer recess.
A spokesperson speaking to the BBC also said:
“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.”
Liberal Democrat peer Lord Oakeshott, also told the BBC: “Why are there no banged-up bankers? That’s what most people want to know after the last five years of scandals and shame.”
What have representatives of the banking industry said?
Former RBS chairman and chief executive Sir George Mathewson told the BBC his opinion on the recommendation to defer bonuses for up to 10 years:
“I find that a little strange. If you are going to have bonuses, they are to incentivise behaviours. Ten years out is not an easy way to imagine incentivisation occurring.”