UK banking commission urges better standards

British bankers could soon be facing harsher penalties for behaving badly.
After a year which has seen major scandals involving rate-rigging, money-laundering and rogue-trading rock the UK's financial industry, an influential parliamentary committee today recommended that senior bankers should be held more accountable for their bank's actions. One measure, it said, should be a new criminal offense of "reckless misconduct", one that could carry a prison sentence.
"The health and reputation of the banking industry itself is at stake," Andrew Tyrie, the chairman of the parliamentary commission on banking standards said in a statement.
"Many junior staff who may have done nothing wrong have been impugned by the actions of their seniors. This has to end."

Treasury chief George Osborne praised the commission on his Twitter feed, describing it as "impressive." He said the report would "help our plan for stronger safer banks."
The report, compiled by a panel which includes lords, lawmakers and the Archbishop of Canterbury, takes a scythe to the industry. It suggests changes that will make many a banker wince.

The committee argues that there has been a "misalignment of incentives," in the financial industry and that pay structure had become "dysfunctional". Because bankers are "paid too much for doing the wrong things", the report says, lapses of standards shouldn't be surprising.

"Public anger about high pay in banking should not be dismissed as petty jealousy or ignorance of the operation of the free market," the report said. "Rewards have been paid for failure. They are unjustified."
Among many of the committee's recommendations is the creation of a code that defers bonuses for longer, and better aligns risk and rewards.
Again and again, the report demanded accountability, arguing that executives turned a blind eye so that they would not be punished for what they could not see.
"Where they could not claim ignorance, they fell back on the claim that everyone was party to a decision, so that no individual could be held squarely to blame, the 'Murder on the Orient Express' defense," the report said.

"It is imperative that in future, senior executives in banks have an incentive to know what is happening on their watch, not an incentive to remain ignorant in case the regulator comes calling.