Sanctions for the directors of failed banks

The government published its response to the Parliamentary Commission on Banking Standards’ report, ‘Changing banking for good’, on 8 July 2013.

The government intends to consider whether to include any necessary legislation in the Financial Services Bill. The measure could be supported by complementary reforms (which the regulators could take forward) to clarify management responsibilities and change the regulatory duties of bank directors.

The consultation also covers the possibility of introducing criminal sanctions for serious misconduct in the management of a bank. If this proposal is taken forward, the government would include the necessary legislation in another Bill during the present Parliament. 

The government welcomes views on the proposal in the consultation paper.

The government accepted a recommendation from the Joint Committee which undertook the pre-legislative scrutiny of the draft Financial Services Bill to consider an issue raised in the report of the Financial Services Authority (FSA) on the failure of the Royal Bank of Scotland (RBS) – whether the balance between risk and reward for the senior executives and managers of banks needs to be adjusted to take into account the wider impacts to which failings by such individuals can give rise.