Banks that fail to protect whistleblowers could face heavy fines under measures being considered by the Financial Conduct Authority (FCA).
The watchdog could begin consultations on the measure within weeks, having identified the issue as a priority for the new year.
The move follows a demand from the Parliamentary Commission on Banking Standards (PCBS), which highlighted improving protection for whistleblowers as a key measure to prevent future wrongdoing at banks and excessive risk-taking by them.
Both the FCA and the Prudential Regulation Authority are also due to make a statement on providing financial incentives for people to come forward.
It comes amid concern that people could still be put off from raising issues because of the risk of retribution from employers, and the difficulties they could face with potential future employers afterwards.
One of the most high-profile whistleblowers in Britain is Paul Moore, who voiced concerns about excessive risk-taking at HBOS to the bank’s board years before its near-collapse. He lost his job as a result.
In an interview with the Financial Times last year he said whistleblowers in the UK and been “ignored, demeaned, dismissed, publicly rubbished and treated like outcasts”. He spoke out shortly after the charity Public Concern at Work had warned that 75 per cent of employees in financial services were ignored when they first raised concerns.
Teams from both watchdogs visited the US last year to investigate the approach taken there with regulators, government, support groups and lawyers. In the US informants can receive between 10 and 30 per cent of any penalties regulators or courts levy on miscreants. However, this can lead to the creation of millionaire whistleblowers, a situation that makes policymakers and watchdogs in Britain queasy, even though proponents say that it could eliminate one of the barriers to whistleblowers acting – severe detriment to their careers.
The FCA does usually seek to protect the identity of an informant, but this isn’t always possible if their information leads to court action against a bank. Watchdogs can, however, appear as a witness during employment tribunals.
Despite the lack of incentives the FCA says it has dealt with more than 5,000 calls from informants over the past 12 months, with a 350 per cent increase between 2007 and 2012. The third quarter of 2013 saw a 72 per cent increase in contacts. The watchdog said it had “conducted a detailed review of our whistleblowing procedures and have increased resources to track and analyse whistleblowing information”.
In September it introduced processes to establish where risks are emerging as well as areas where intelligence gaps exist, besides responding to specific whistleblowing concerns.