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Criminalising bankers?

Whilst the Parliamentary Commission on Banking Standards calls for more emphasis on personal responsibility and suggests that senior bankers who have acted recklessly should face prison sentences, you do have to wonder who would work in banking?

MPs have called for a new criminal offence to be created: “reckless conduct in the management of a bank”, which would carry an automatic prison sentence. We must note there was never any call for a similar offence two years ago of: “reckless conduct in the management of one’s parliamentary expenses”.

On the face of it and following the banking debacles of recent months, you can understand why the MPs may bow to public pressure to create such a banking offence. I’m sure the public would relish seeing some wealthy senior bankers confined indefinitely at Her Majesty’s pleasure. However, we do still rely on our banking system to protect our wealth in the UK and we run the risk of putting off the brightest young recruits from entering the profession.

Whilst it is all well and good to say that senior personnel will be held responsible, the fact of the matter is that they will not be the ones being held liable by the prosecuting authorities. We will simply see clever delegation of duties to lower level personnel, who will see their careers ended abruptly as they were striving up the ladder. Pressure will be applied from above to ensure that the most senior officers will be far removed from the culpable conduct. They will not be the “reckless” ones.

I agree with the Institute of Directors which disagreed with the recommendations, suggesting they could prove to be counter-productive.

Dr Roger Barker, director of Corporate Governance and Professional Standards at the IoD, said: “The recommendation that senior individuals are given legal responsibility for a particular area of a bank’s operations is flawed. Effective board governance involves making decisions and taking responsibility as a group. If individuals focus only on their own exposure, it will actually make them less likely to challenge other members of the board and weaken the organisation.”

“This move could be counter-productive. The risks associated with taking on personal liability could make it hard to recruit senior people and potentially drive up pay, which is clearly not the Commission’s intention.”

As an experienced criminal practitioner, I am all too familiar with situations where senior personnel will point the finger at their subordinates and create ‘scapegoats’.

This is not what the banking system needs.

This was posted in Bdaily's Members' News section by Andrew Swan .