UK urged to beef up power to ban rogue bankers
LONDON (Reuters) - Britain needs more power to ban rogue bankers and should set up a new body to oversee a stringent code of standards, banks and regulators said in proposals to repair the industry's battered reputation.
Britain's financial regulator asked for more powers to root out abuse, including the power to ban temporarily anyone in an influential position, to help restore public trust in the sector.
"This power would be a significant tool which would allow the regulators to act swiftly to counter any threat to their objectives by an approved person remaining in position pending an appeal," the Financial Services Authority said on Friday.
Barclays, at the heart of recent criticism for lax standards after an interest rate-rigging scandal, said Britain should set up a new register with the power to ban bankers if they fell short of standards.
A Chartered Institute of Bankers would promote improved standards and oversee a register for staff, who could be struck off, Barclays said in its submission to the Parliamentary Commission on Banking Standards.
Virgin Money, which last year bought former nationalised lender Northern Rock, said there was "a strong case" to force a full split of retail and investment banking businesses.
The submissions were released at the start of a three-month inquiry by MPs into banking standards following a string of scandals, including Libor rigging at Barclays and the mis-selling of millions of insurance policies across the country.
Banks are battling to win back public confidence after reckless lending led to the 2007-08 financial crisis - which saw taxpayers bail out several lenders. Recent mis-selling scandals have intensified calls for the government to act.
"TRUST HAS BROKEN DOWN"
There were few specific proposals in the 492 pages submitted to the inquiry, although banks, regulators, unions and other parties all said there was a need to act.
"Trust has broken down, not only in banks but also in bankers," said Lloyds Banking Group, Britain's biggest retail bank. "Fixing that requires a shift in the tone from the top - a shift in values and culture."
A number of the industry's ills were caused by an obsession with short-term financial performance, a war for talent that drove up pay and bonuses, and regulators relying too much on the market, Lloyds submission said.
It also called on the Commission to examine the existing approach to professional standards.
Hermes Equity Ownership Services, an investor advisory group, slammed the industry's failure to exclude those individuals who fail to live up to expected standards.
Trade union Unite called for an overhaul of the pay system and said it would support the future prosecution of individuals identified for any failure in corporate responsibility.
"It was not just a few bad apples in the trading room floors of the banks that went unnoticed, but fundamental failing in the boardroom with those in positions of influence displaying a staggering lack of competence and an innate inability to accept responsibility," Unite said.
HSBC, Europe's biggest bank, said there was a need to ensure criminal sanctions can be levied against individuals whose behaviour fell well outside defined norms.
The FSA, which will be replaced by the Financial Conduct Authority next year, said senior management could have to face "personal consequences" if there were losses from excessive risk taking and it wanted direct powers to refer financial markets issues to the Competition Commission.
It also called for an extension of the three-year limit within which the regulator must issue a warning notice against regulated staff at banks and other financial institutions.
That and its other proposals would give the watchdog more time to pursue lengthy fraud cases, which can involve coordination with several overseas regulators, and to also drill down to more junior staff.
Barclays was hit with a $450 million (276.8 million pounds) fine in June for manipulating interbank lending rates and British banks face a 10 billion pound bill to compensate customers mis-sold insurance policies and also a bill to compensate small businesses mis-sold interest rate hedging products.
The Parliamentary Commission on Banking Standards inquiry is due to last three months and call bosses from all top banks as well as regulators, consumer and other interest groups.
It will make legislative proposals by December 18.
(Additional reporting by Sven Egenter, Douwe Miedema, Sarah White and Tommy Wilkes; Editing by Dan Lalor and David Holmes)
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