CHICHESTER MP Andrew Tyrie has said there is ‘shocking and widespread malpractice’ in the banking industry.
Following the publication of the Parliamentary Commission on Banking Standards’ final report – Changing banking for good – yesterday, Mr Tyrie has spoken of the need for radical reform.
He is chairman of the Parliamentary Commission on Banking Standards.
The commission was established in July, 2012, in the wake of the LIBOR scandal, to conduct an inquiry into professional standards and culture in the UK banking sector and to make recommendations for legislative and other action.
“Recent scandals, not least the fixing of the LIBOR rate that prompted parliament to establish this commission, have exposed shocking and widespread malpractice,” said Mr Tyrie.
“Taxpayers and customers have lost out. The economy has suffered. The reputation of the financial sector has been gravely damaged. Trust in banking has fallen to a new low.
“Prudential and conduct failings have many shared causes but there is no single solution that can restore trust in the industry. The final report contains a package of recommendations that, together, change banking for good.
“A lack of personal responsibility has been commonplace throughout the industry. Senior figures have continued to shelter behind an accountability firewall.
“Risks and rewards in banking have been out of kilter. Given the misalignment of incentives, it should be no surprise that deep lapses in banking standards have been commonplace.
“The health and reputation of the banking industry itself is at stake. Many junior staff who may have done nothing wrong have been impugned by the actions of their seniors. This has to end.
“Rewards for success should be better focussed on generating long-term benefits for banks and their customers.
“Where the standards of individuals, especially those in senior roles, have fallen short, clear lines of accountability and enforceable sanctions are needed.
“They have both been lacking.
“It is not just bankers that need to change. The actions of regulators and governments have contributed to the decline in standards.
“Governments need to get on with the job of implementing these reforms. Regulators and supervisors need rigorously to enforce them.
“We need better regulation: this may mean less, not more. And we need a better functioning and more competitive banking industry.
“High standards will strengthen Britain as a global financial centre. International co-ordination, while desirable, should not be allowed to delay reform. We must get on and do what is right for the UK.”
A new Senior Persons Regime, replacing the Approved Persons Regime, to ensure the most important responsibilities within banks are assigned to specific, senior individuals so they can be held fully accountable for their decisions and the standards of their banks in these areas.
A new licensing regime underpinned by Banking Standards Rules to ensure those who can do serious harm are subject to the full range of enforcement powers.
A new criminal offence for Senior Persons of reckless misconduct in the management of a bank, carrying a custodial sentence.
A new remuneration code better to align risks taken and rewards received in remuneration, with much more remuneration to be deferred and for much longer.
A new power for the regulator to cancel all outstanding deferred remuneration, along with unvested pension rights and loss of office or change of control payments, for senior bank employees in the event of their banks needing taxpayer support, creating a major new incentive on bankers to avoid such risks.