Lord Turner, the chairman of the Financial Services Authority (FSA), wants to start a national debate on imposing more punitive measures against bank executives and directors in any future collapse or bailout.
"People want to know why RBS [Royal Bank of Scotland] failed and why no one has been punished," Lord Turner said.
He admitted that the FSA had been "seriously flawed" but claimed it was "very different now."
"The fact that no individual has been found legally responsible for the failure begs the question: if action cannot be taken under existing rules, should not the rules be changed for the future?"
He suggested two ways of doing this:
l a "strict liability" approach, making it more likely a bank failure like RBS's would be followed by successful enforcement actions, including fines and bans;
l an automatic incentives-based approach involving either rules which automatically ban senior executives and directors of failed banks from future positions of responsibility, or major changes to remuneration to ensure a significant proportion of pay is deferred and forfeited in the event of failure.
Lord Turner said: "There are important pros and cons of these different ways forward, and complex and important legal issues which would need to be considered. But by one means or another, there is a strong argument for new rules which ensure that bank executives and boards place greater weight on avoiding failure."
But he cautioned that if new rules went too far "no sane person would ever consider sitting on the board of a bank".
He promised a consultation paper in the new year.
The FSA has been widely criticised because of its failure to take action against all but one of RBS's former directors, including its chief executive, Sir Fred Goodwin.
Lord Turner accepted the report's criticism of the regulator: "The FSA had developed a philosophy and approach to the supervision of high-impact firms, and in particular major banks, which resulted in insufficient challenge to RBS's poor decisions. The FSA's approach reflected widely-held but mistaken assumptions about the stability of financial systems and responded to political pressures for a 'light touch' regulatory regime."
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