Treasury wants to jail reckless bank directors

Tim Wallace
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RECKLESS bankers who take excessive risks could end up in jail under plans unveiled by the Treasury last night.

Following the Financial Services Authority report that revealed widespread management failures in the run-up to the collapse of RBS, the government also wants to make it harder for the bosses of failed banks to take up roles at other institutions.

Announcing the proposals, the Treasury said that “the events of recent days have further highlighted that the culture of banking is badly broken”.

The government hopes the consultation will be complete by the end of September, so the proposals can join the banking reform bill being put before parliament next January.

“These proposals are some of the most ambitious in Europe and will make it easier for the regulator to stop directors of failed banks from taking up similar positions in the future,” said Treasury minister Mark Hoban.

Under the new plans, directors and senior management could become subject to criminal sanctions as a result of negligence, incompetence, recklessness, or simply being in position when a bank fails.

But the consultation acknowledges there are potential problems with the plan – for example, directors in position when the bank collapses may not be responsible for its failure, as they could be trying to repair damage done by earlier managers.

The government also wants to make it tougher for directors of failed banks to take roles at other institutions.

Currently the onus is on regulators to explain if a candidate is unsuitable – in future, it may be the director who has to convince regulators why they should be allowed to take the job.