The Times Published: 6 March 2016
Crackdown: bankers found guilty of reckless misconduct will face jail sentences of up to seven years (Andrea Baldo/Getty Images)
TOUGH new rules to punish rogue bankers will come into force tomorrow.
Senior bankers found guilty of reckless misconduct will face jail sentences of up to seven years, and banks will have to appoint senior managers to “whistleblowing” roles to make it easier for staff to expose potentially illegal behaviour.
The rules are a response to public anger over scandals in the financial industry. They are intended to hold the highest earners in banks and insurers to account for serious failures.
Banks have already begun preparing for the enforcement of the Senior Managers Regime by clarifying areas of responsibility.
One of the criticisms of the previous system was that it was difficult to bring senior executives to book when more junior staff broke the rules.
An estimated 15,000 City workers — including chief executives, chairmen, board members and key “risk takers” — are on a list of accountable senior managers drawn up by the Bank of England and the Financial Conduct Authority.
“These [rules] will be used to pin blame on individuals where an issue occurs in their area of responsibility,” said Adrian Crawford, a partner at London law firm Kingsley Napley. “More senior managers might have been held to account for Libor, for example, if the regime had existed then.”
During their investigations into recent City scandals, regulators have struggled to bring action against senior bankers.
However, there are concerns that the threat of prison is stifling the City. “We have heard anecdotally that some banks now have a lawyer present at every meeting. As a result, decision-making is becoming increasingly bureaucratic,” said Crawford.
The rules follow recommendations made by the parliamentary commission on banking standards, which was established to improve the culture and conduct of the industry.
Bankers fought against the introduction of a criminal component in the regime. It was one of the factors HSBC took into account during its recent deliberations on whether to move its headquarters out of Britain.