Chancellor endorses banking reform

An 80-page response to the 571-page independent commission’s report, Changing Banking for Good, revealed that the government intended to implement recommendations to address the failings identified by the Commission on individual accountability, corporate governance, competition and long term financial stability.

Chancellor George Osborne was expected to address parliament this afternoon on the proposals.

Proposals included

• Introducing a criminal offence for reckless misconduct for senior bankers, with those found guilty potentially facing custodial sentences

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• Working with regulators to ensure banker pay is aligned with performance, including allowing bonuses to be deferred for up to ten years and enabling 100 per cent clawback of bonuses where banks receive state aid

• Introducing a tough new regime governing the behaviour of senior bank staff and new rules to promote higher standards for all bank staff

• Reversing the burden of proof so that bank bosses are held accountable for breaches within their areas of responsibility

• Working with regulators to strengthen corporate governance to ensure that firms have the correct systems in place to identify risks and maintain standards on ethics and culture

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

“Last summer I called for a thorough and intensive investigation into how to improve standards in the banking system and the PCBS has delivered. 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.”

Business secretary Vince Cable said: “If we are to get our economy back on track, we need to get the banking system back on track first.

“Creating new powers to jail bankers who are reckless with other people’s money and getting more competition into banking, is a start. The £4bn business bank that I am setting up will also help more small businesses get the cash they need.”