The government has suffered a set-back in its attempts to push through a new suite of banking reforms, as peers in the House of Lords last night (26 November) voted in favour of an amendment that would introduce a tough new ‘licensing’ regime for senior staff.
Licencing of senior staff on an annual basis had been among the recommendations of the Parliamentary Commission on Banking, but while the government had accepted the majority of the commission’s proposals it had decided against introducing ‘licensing’ and instead proposed a more stringent ‘approvals’ regime.
Andrew Tyrie, Tory MP and chair of the commission, earlier this month hit out at the plans in the wake of the drug scandal surrounding former Co-operative Bank chairman Paul Flowers, as he railed against the previous “bureaucratic box-ticking”.
He said: “Both the government and the regulators have, in principle, endorsed the creation of a new system for the most senior bankers. That is a step forward; but the legislative proposals remain silent on licensing. That’s not so good.”
The Lords vote saw peers vote 222 to 217 in favour of an amendment to introduce licensing under the ‘professional standards’ section of the Bill. It followed demands from Tory peer Lord Lawson and Archbishop of Canterbury Justin Welby for changes to the reform package in the wake of the Co-op revelations and other recent scandals.
The government did secure a minor victory with a defeat for a separate amendment that would have allowed for an industry split in the event that the proposed banking ‘ringfence’ fails, which was narrowly beaten by 229 votes to 220.
Following the Lords’ vote the Bill will now pass back to the House of Commons in order for the amendment to be debated, where it is expected to meet stiff government opposition.
Under the current proposals a ‘senior persons regime’ for bankers would be introduced, which would introduce a set of ‘individual standards’ rules and new criminal sanctions for reckless misconduct by senior bank staff.
The Financial Conduct Authority has said the new regime will “set expectations” for senior staff rather than simply acting as an “initial gateway”.