Bad bank chiefs face ousting or, at worst, seven years' in jail
Banks were yesterday told they face tough stress tests every year to ensure they can withstand a repeat of the financial crisis.
Meanwhile, draft laws were published that would send senior bankers to jail for up to seven years if their bank failed and they were found guilty of a new offence of "reckless misconduct". The laws had been recommended earlier in the year by a cross-party committee of MPs but were only included in a wide ranging set of proposed amendments to the Banking Reform Bill.
Under the Bank of England's new powers, bosses could be ejected from their posts if they fail to meet required standards on setting up adequate financial buffers.
Banks could also be required to hold more capital than international rivals. "At the very least, banks would need to maintain sufficient capital to be able to absorb losses in the stress scenario and not fall below internationally agreed minimum standards," the Bank of England said.
The tests are designed to be tough, and considerably tougher than those mandated by the EU. The Bank also made it clear that they will not be used to give mere "pass or fail" results.
Rather, the Bank, through its Financial Policy Committee and Prudential Regulation Authority (PRA), will be able to order banks to increase capital in specific areas and even demand management changes.
The Bank's Deputy Governor, Paul Tucker, said: "We believe that a stress-testing regime can enhance the quality of the Bank's macro and micro... supervision and, over time, underpin confidence in the banking system."
He also emphasised that it will help make the newly all-powerful Bank accountable to the public through Parliament. "To have such power with limited transparency would be uncomfortable," he said. Bankers last night claimed to be sanguine about the tests, but regulators have privately said that several big financial institutions had to be dragged "kicking and screaming" into boosting their capital strength when the PRA said there was a collective £25bn financial black hole in the UK industry's collective balance sheet earlier this year.
- 1 Revolutionary lost Caravaggio painting 'Mary Magdalen in Ecstasy' identified
- 2 McKamey Manor: This 'extreme' haunted house is the stuff of nightmares
- 3 Russell Brand says he will 'probably' give up acting to focus on his revolution
- 4 Watch what happened when food critics were unknowingly served McDonald's
- 5 David Beckham's Haig Club whisky is exactly what’s wrong with the Highlands
Putin accuses US of causing global instability
Eleven members of same family hospitalised after eating deadly pufferfish
FCKH8: YouTube reinstates provocative anti-sexism video showing young girls swearing
Phone-hacking: The Piers Morgan connection - Mirror admits some stories during Morgan's tenure may have been obtained by illegal means
Russell Brand says he will 'probably' give up acting to focus on his revolution
Of course, teenage girls need role models – but not like beauty vlogger Zoella
Cameron is warned 'no possibility' of UK reducing immigration and that bid to bring in quota on migrant workers would be illegal
Support for EU membership 'at highest level since 1991' with most Brits wanting to stay 'in'
Thousands with degenerative conditions classified as 'fit to work in future' – despite no possibility of improvement
Tony Blair 'says Ed Miliband will lose 2015 general election'
Attacks on 'Ukip Calypso' show how skewed people’s priorities are
iJobs Money & Business
£60000 per annum: Ashdown Group: Compensation and Benefits Manager - Compensat...
£30000 - £35000 Per Annum plus excellent benefits: Clearwater People Solutions...
£24000 - £28000 per annum + bonus & benefits: Ashdown Group: IT Business Syste...
£50000 - £90000 per annum + benefits: Ampersand Consulting LLP: Markit EDM (CA...