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Would the threat of jail be enough to end bankers' reckless behaviour?

Written by  Published in Business Monday, 26 November 2012 11:52
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The parliamentary commission on banking standards has recommended new laws so top bankers can be jailed for 'reckless misconduct'

A major report from the parliamentary commission on banking standards calls for a new law to jail bankers for reckless misconduct, the deferral of bonuses and more measures to foster competition. The commission, chaired by Conservative MP Andrew Tyrie, also reopens the debate about the future of partly taxpayer-owned RBS and Lloyds.

 

Ed Balls, Labour's shadow chancellor

 

On the future of RBS and Lloyds, it is vital that government decisions are driven by the best interests of the British taxpayer and the wider economy, not a political timetable. On RBS in particular, David Cameron and George Osborne must resist the temptation for a loss-making firesale at the current share price which would add billions to the national debt … The government must look at the whole range of options for the future of RBS to ensure the taxpayer gets its money back and there is no return to business as usual. This should include looking at the case for splitting retail and investment banking at RBS, as the commission proposes.

 

Chuka Umunna, shadow business minister

 

It is absolutely right, as the parliamentary banking commission says, that senior bankers guilty of reckless misconduct should be jailed.

 

Lord Myners, former Labour city minister

 

This is a scholarly report which will meet considerable resistance over time from the banks … [The banks] have successfully derailed a number of similar interventions on capital, ringfencing, bonuses and I think we will see a similar response here.

 

In many areas Tyrie has said there should be further reviews … very little is going to happen in the next 24 months as a result of this report.

 

John Cridland, CBI director-general

 

There are tough criminal sanctions in the UK for those who engage in fraudulent behaviour. Enforcing these must come before the introduction of new sanctions.

 

The commission has not followed the ill-advised route of trying to impose artificial pay caps. Ensuring remuneration is firmly linked to long-term performance and behaviour is the right way to promote a better culture.

 

RBS is already well down the route of restructuring its business. It's in everyone's interests, including businesses, for RBS to be returned to private hands as soon as possible, and the best way to do this is to give the bank regulatory certainty and the space to restructure, free from political interference.

 

Len McCluskey, Unite general secretary

 

The commission has flunked a golden opportunity to recommend that the government explores the full nationalisation of RBS … RBS could become the dynamo which helps drive the UK out of the economic doldrums through lending and support to businesses and communities.

 

This would repay British taxpayers by building a British investment bank. Powerhouse nations like Germany use their banks to promote jobs and growth for future generations.

 

The commission had an open goal to help rein in City excess and it missed.

 

Tinkering at the edges is not enough. The differences between the pay of the highest and lowest paid in Britain's biggest banks is completely unacceptable. Spreading reward more evenly across the banks would embed a culture of fairness and responsibility.

 

John Allan, national chairman of the Federation of Small Businesses

 

Small firms have been rocked by scandal after scandal in the banking sector, not least Libor rigging and mis-selling of complex financial products, which has affected many of our members. We feel these recommendations should help clean-up the sector as well as encourage greater competition. However, a decade ago, the Cruickshank report identified many of these problems, so the fact another review is needed is a sad indictment of the lack of progress.

 

With the concentration of banking in the last 20 years, real competition and choice has all but vanished. More competition is needed across the sector, not just in retail banks but from alternative providers, if access to finance is to improve for small firms and for innovation to flourish. For too long the main high street banks have had a monopoly on lending to these customers.

 

Tom Gosling, head of PwC's reward practice

 

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.

 

Regulators are looking to [bonus] deferral as the answer, but we're sceptical this will do much to change bankers' behaviour as deferred bonuses hold little value in their eyes. Our research shows that people discount bonus payments by around 25% for each year they are deferred. Deferring bonuses for even longer periods, particularly if claw-back becomes more likely, will mean they are entirely disregarded in employees' eyes.

Read 81429 times Last modified on Wednesday, 19 June 2013 07:52

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