Andrew Bailey to the US: Hit bankers, not the banks

Tim Wallace
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Andrew Bailey
JAILING, fining and firing more individual bankers is a better way to punish bad behaviour than hitting banks with crippling fines which could risk their stability, Bank of England regulators told MPs yesterday.

In an attack on US regulators and their mega-fines, prudential regulation authority (PRA) head Andrew Bailey argued it is more important to build up capital buffers to protect the banking system than to take billions of dollars off banks for long-past scandals.

“There is no question the largest fines come from the US,” he told the Treasury select committee of MPs.

“It is obviously painful as a prudential supervisor to see capital going out the door, as happens with fines.”

Bailey added he has been in talks with a range of US regulators, but has not yet convinced them of his case. He wants individual bankers to have a bigger stake in the success of the business, and to pay more personally when it fails or when they misbehave.

“One possible reason why the fines have escalated may be that the authorities are frustrated with their lack of ability to hold individuals to account,” said PRA non-executive director Charles Randell.

“If we can...tell foreign authorities that the guilty [staff] have been marched off the premises, that the management have been changed, and there is little sense to a fine for the bank [there may be a] more constructive engagement than we have at the moment.”

Meanwhile, Bailey revealed he had used his position on the European Banking Authority board to vote in favour of banks paying fixed allowances to fit in with the EU’s cap on bonuses – contradicting the EBA’s claim the vote was unanimously against the allowances.

“Andrew Bailey today told the committee that the EBA ‘incorrectly transmitted’ his views on role-based allowances last week,” said the committee’s chairman Andrew Tyrie MP.

“This looks like a shocker. We will be seeking a full explanation.”