The Bank of England has confirmed plans to introduce new curbs for bankers' bonuses following a week marred by financial scandals in the City.
Under the new rules, bankers face jail time and could have their bonuses taken away up to seven years after they are awarded in an attempt to prevent misconduct and reinforce accountability for reckless decision-making.
None of the top executives involved in the financial crisis were prosecuted for their decisions leading up to the banks' bailouts by the government that cost taxpayers billions of pounds.
“Holding individuals to account is a key component of our job as regulators of banks," said Andrew Bailey, the Bank's deputy governor for prudential regulation.
"The combination of clearer individual responsibilities and enhanced risk management incentives will encourage individuals in banks to take greater responsibility for their actions."
Video: Vince Cable on bankers' bonuses
Bankers usually receive bonuses, paid in cash or shares, on top of their base salary. But these could now be clawed back even after they are paid out if conduct failings come to light at a later date. Under the new proposal, the Bank will also require banks to defer payment of bonuses for a minimum of five to seven years, depending on seniority.
The announcement follows a week marred by scandal after Lloyds was fined £217 million over Libor rigging on Monday.The bank, which was rescued by a £20.5 billion bailout at the height of the financial crisis, came under intense scrutiny from regulators, including Governor Mark Carney, who described the behaviour of the traders as "highly reprehensible".
In a separate development, UBS and Deutsche Bank admitted they had been dragged alongside Barclays into an escalating probe into high-frequency “dark pool” traders on Tuesday, which could see more fines coming their way.
The rules will come into force on 1 January next year.