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Bankers in jail?

Chain-Gang-2

Many may say that this is legislation that has come about a little bit too late and it might also be argued that such cases will be nigh on impossible to prove. Fred Goodwin being a prime example whereby it has been fairly clear that it was his arrogance and stupidity that led to the failure rather than a knowledge of the risks involved

Senior UK bank managers could face seven years in jail or an unlimited fine if their actions cause their institution to fail.

The new law, which comes into force today, is part of the government’s plans to reform the UK’s financial services sector to ensure that lessons have been learnt from previous financial crises.

The new rules mean that individuals working in UK firms face some of the toughest sanctions in the world.

“This government has learnt the lessons of the past,” commented George Osborne, the Chancellor of the Exchequer.

“The new criminal offence, which becomes law today, is the latest milestone in my plan to ensure that the British banking industry operates to the highest possible standard. It is absolutely right that a senior manager whose actions causes their bank to fail should face jail.”

From today, senior UK managers in banks, building societies or other investment firms regulated by the Prudential Regulation Authority, will have committed a criminal offence if:
He or she agrees to the taking of a decision which causes the institution to fail
At the time of the decision, he or she was aware of the risk that the decision could cause the institution to fail
his or her conduct in relation to the decision fell far below what could reasonably be expected of a senior manager in that position
Also coming into force today is the new Senior Managers and Certification Regime (SM&CR) which replaces the existing Approved Persons Regime for deposit takers and investment banks.
The new regime shifts responsibility for ensuring key staff below senior management levels are fit and proper to the firms themselves.

The top people of these institutions will have “statements of responsibility”, which means they will have nowhere to hide if their firm breaches regulatory requirements.

Under the SM&CR, regulators will also have greater flexibility to impose high standards of conduct on a wider range of staff, including individuals doing jobs for which prior regulatory approval is not required.

 

 

 

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