The idea, which was floated in an essay in the Bank's latest 'Financial Stability Review', would see the chief executive and chief financial officer of banks promising that Banking Act requirements and policy guidelines had been complied with. The proposal would closely mirror a system in New Zealand where false or misleading disclosure statements incur potentially severe civil and criminal penalties.
The idea of the disclosure statement comes after a similar controversial proposal by the Securities and Futures Authority. It suggested a new rule imposing a direct duty on senior executive officers to take all reasonable steps to ensure their firm's employees act in a way which avoids seriously damaging its reputation.
That proposal caused a storm of protest because it appeared to imply a reversal of the burden of proof. The SFA subsequently modified the suggestion so that the onus of proving misconduct remained with the regulator, as at present.
The Securities and Investments Board also put out a consultative paper in July on the responsibilities of senior managers. SIB suggested that every firm should have to prepare a statement setting out its management structure and defining where responsibilities rested.