HM Treasury has published a Consultation Paper on proposals to sanction the directors in charge of banks that fail.

The financial crisis has made it clear that key decisions within financial institutions, particularly banks, are often made by individuals (senior directors of the bank) and these decisions have important and far reaching consequences. To balance this, it is important that those directors are also accountable and responsible for the risks and problems that their institutions suffer. The Consultation Paper sets out a proposal to introduce a "rebuttable presumption" that a director of a failed bank is not suitable to be approved by the regulator to hold a senior executive position in any other bank. Any such director would have to prove that s/he was not responsible for the failure of the bank and that they are suitable for the new role. The legislation imposing this requirement is proposed to be added to the Financial Services Bill 2012-13.

The government is also considering the introduction of criminal sanctions for serious misconduct in relation to the management of a bank. Controversially, the proposed new criminal offence would not necessarily involve any element of dishonesty when committed. This provision would be drafted into separate legislation as there is not enough time to consider all the complex issues of this matter to add the provisions to the Financial Services Bill 2012-13.

Responses to this Consultation Paper should be sent by 30 September 2012.