The Parliamentary Commission on Banking Standards has published its Final Report. Its recommendations for regulatory reform include:
- replacing the Approved Persons Regime with a Senior Persons Regime, which would ensure that specific individuals are made accountable for key responsibilities within a bank, and a Licensing Regime, applicable to other staff who could harm the bank or its customers. Both Senior Persons and licensed staff would be bound by a single set of Banking Standards Rules, the contravention of which would constitute grounds for enforcement action;
- reforming the Remuneration Code, to include deferral of bonuses for periods of up to 10 years, or their cancellation in the light of misconduct, downturn in the bank's performance, or where the bank requires taxpayer support;
- placing on Senior Persons the burden of proving that they took all reasonable steps to prevent a failing, and introducing a criminal offence applicable to Senior Persons who acted recklessly;
- improving governance, by establishing direct lines of access to the board for the risk functions, providing for effective challenge to the board by non-executives, and amending the Companies Act to prioritise financial safety over shareholder value in the case of banks; and
- several measures to promote competition and to improve the quality of regulation. The latter include a new "special measures" tool whereby the regulators would enter a formal commitment letter with the bank to secure and monitor the implementation of measures to rectify problems identified by the regulators.
The Final Report also recommends leaving to the regulators the decision to vary the leverage ratio. (Source: Banking Commission Publishes Report on Changing Banking for Good)