Senior bankers who are guilty of reckless misconduct could be jailed and bankers’ bonuses should be deferred for up to 10 years to ensure that long-term performance objectives are met.
These are two of the hard-hitting recommendations made in the long-awaited final report on reforming the banking industry, which has just been published by the Parliamentary Commission on Banking Standards.
The report, entitled Changing banking for good, outlines a number of other radical measures for improving standards within the industry. These include giving senior bankers clear personal responsibilities and enhancing regulators’ powers so that they can cancel all outstanding deferred remuneration for senior bankers in the event their institution needs a taxpayer bailout.
The plight of the ‘unbanked’ was also highlighted in the report, which said: “Banking the unbanked should be a customer service priority for the banking sector”. The commission stressed that greater competition could help to improve standards within the banking sector and increase innovation and choice. It said that regulators needed to be less resistant to new entrants looking to enter the market.
Commenting on the final report, commission chair Andrew Tyrie MP said that the banking sector was guilty of “shocking and widespread malpractice”. “Taxpayers and customers have lost out,” he added. “The economy has suffered. The reputation of the financial sector has been gravely damaged. Trust in banking has fallen to a new low.”
Justin Welby, the ACT’s confidential adviser on ethical and personal issues and the archbishop of Canterbury, is a member of the Parliamentary Commission on Banking Standards.
Sally Percy is editor of The Treasurer