Sanctions and whistle-blower safety to change banking culture

 

The recommendations cover several main areas including: making senior bankers personally responsible, reforming bank governance, creating better functioning and more diverse markets, reinforcing the powers of regulators and making sure they do their job.

 

 

A new Senior Persons Regime is a central recommendation of the report and would replace the Approved Persons Regime. Its goal is to ensure that the most important responsibilities within banks are assigned to specific, senior individuals so they can be held fully accountable for their decisions and the standards of their banks in these areas.

 

Highlighting the issue of accountability chairman of the Parliamentary Commission on Banking Standards, Andrew Tyrie MP said:

 

“Personal accountability is little more than an illusion in many parts of banking, especially at senior levels.

 

Replacing the discredited Approved Persons Regime with the Senior Persons Regime would create meaningful lines of personal accountability, changing behaviour and making enforcement against individuals easier.”

 

In a crackdown on impunity the report introduces a new criminal offence of reckless misconduct in the management of a bank for all those covered by the new Senior Persons Regime. This offence would, for the most serious cases, carry a custodial sentence. 

 

Tyrie continued: “Under our recommendations, senior bankers who seriously damage their banks or put taxpayers’ money at risk can expect to be fined, banned from the industry, or, in the worst cases, go to jail. That has not been the case up to now. “

 

Whistle-blowers are also singled out as needing greater protection under the auspices of a non-executive board member, responsible for the effective operations of a bank’s whistleblowing regime.

 

 

The report signals the need to go beyond crude bonus caps to curb incentives for misconduct and excessive risk-taking. It introduces a new remuneration code to align risks taken and rewards received in salary, with much more remuneration to be deferred and for much longer.

 

Under this code regulators would also be able to monitor the measures used to determine pay and oversee the balance between risk and reward.

 

In the charity banking sector and other pockets of the private sector a constructive and timely discourse around employee ownership has emerged as an alternative perspective on banking and business culture.

 

In July last year, following the scandal, which saw Barclays fined £290m for rigging inter-bank interest rates, the Nutall Review highlighted the positive impact of employee ownership schemes on business culture.

 

One function of an employee owned business – which is owned by its workers and distributes its profits between them – is to drive accountability and individual responsibility. 

 

The John Lewis Partnership is one example of an employee owned private sector business.  Unity Trust Bank, a leading specialist bank for social economy organisations also announced earlier this month the establishment of an Employee Share Ownership Plan (ESOP) that will ensure staff share in the bank’s success.

 

Peter Kelly, business development and marketing director at Unity Trust Bank said:

 

“For us it’s a perfect fit with our social values, it’s a more responsible way of running a business. Wider employee ownership and improving staff stake in an organisation has proven to help lower the rate of staff turnover, create a happier workforce, and perhaps also a stronger organisation when times get tough.

 

In some quarters people will say this is just for social enterprise and non-profits, but that’s not true. I think there is a great deal of learning that large corporates can make from social enterprise in terms of the welfare of its staff.

 

Of course, we are a social enterprise. But we’re not a non-profit. Our mission is to achieve growth by being socially focused, customer centred and firmly commercially driven.”