Parliamentary Standards Commission makes call to get tough with the bankers

Group demands fines and bans for those who behave negligently

Bankers who behave negligently in future must receive harsh penalties, including fines and bans from both the City and from being company directors, the Parliamentary Commission on Banking Standards is set to say.

The commission's hotly anticipated report will be unveiled this week, and Treasury sources said they did not expect strong disagreement from the Chancellor to the broad thrust of its recommendations.

The final text on the future for Royal Bank of Scotland (RBS) is also set to be one of the major talking points, given the desire of at least two of its members to see the state-owned bank broken up.

However, this may be one of the few areas in which the Treasury backs away from the tough proposals suggested by the commission because of its desire to kick-start privatisation in 2014, and the damage done to that by the departure of RBS chief executive Stephen Hester at the end of the year.

Beyond that, the industry is braced for an extremely rough ride from the commission.

The all-party body is chaired by Andrew Tyrie and made up of a combination of MPs, peers and external members including Justin Welby, the Archbishop of Canterbury, Lord Lawson and former cabinet secretary Lord Turnbull.

Members have expressed their surprise and unhappiness at the seeming inability of regulators to bring those seen as responsible for the financial crisis to book.

This is likely to lead to a string of recommendations aimed at toughening up the rules, and could include the creation of a new standards body with powers of sanction.

However, it is understood that the report also contains a number of "surprises". The commission has already shown it has no qualms about radical thinking.

Its first report forced the "electrification" of the ring fence around retail banking on a reluctant Chancellor, giving regulators reserve powers to break up banks which seek to "game" or get around it.

While 2014 has been targeted as the date for a sale of the state's interest in RBS, Prime Minister David Cameron last week played down talk of any early sell off, saying he wanted taxpayers to get their money.

City headhunter Anna Mann has started work on finding a successor to Mr Hester, and will need time to restore the City's faith in the bank and its ability to be run without interference from Westminster.

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