The British government said Monday it will embrace many of the recommendations of a parliamentary committee to further overhaul the banking business in that country.
In its response to the Parliamentary Commission on Banking Standard’s (PCBS) report, which was published earlier this year, the government said that it endorses the report’s principal findings and intends to implement its main recommendations to address failings of individual accountability, corporate governance, competition, and longpterm financial stability.
Specifically, the government said that it intends to strengthen standards in banking by: introducing a criminal offence for reckless misconduct for senior bankers; working with the regulators to ensure bankers’ pay is aligned with their performance, including allowing bonuses to be deferred for up to 10 years and enabling 100% clawbacks of bonuses; introducing a new regime to govern the behaviour of senior bank staff and new rules to promote higher standards; and, toughening corporate governance.
Additionally, it said it intends to foster competition in the sector by: providing the Prudential Regulation Authority (PRA) with a competition objective; and, asking the new payments regulator to examine account portability and whether the big banks should give up ownership of the payments systems. It will also look at whether to split RBS into a ‘good bank’ and ‘bad bank’ of risky assets.
It notes that the committee’s conclusions are being implemented less than a year since it was set up in the wake of the London Interbank Offered Rate (LIBOR) scandal last summer.
Chancellor of the Exchequer, George Osborne, said, “The government is determined to raise standards across the banking industry to create a stronger and safer banking system. 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.”