Politicians lack the 'courage' to punish bad bank bosses, says former regulator

'Without penalising perpetrators and their seniors we will not get better behaviour'

Ben Chu
Economics Editor
Friday 27 November 2015 20:58
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The Financial Conduct Authority (FCA) found Barclays guilty of helping wealthy clients avoid criminal activity checks
The Financial Conduct Authority (FCA) found Barclays guilty of helping wealthy clients avoid criminal activity checks

A former senior Bank of England regulator has accused UK politicians and regulators of lacking the “courage” to hold bank executives to account for the avalanche of financial misconduct that has taken place in their institutions in recent years.

Writing for The Independent, FF, a member of the Bank of England’s Financial Policy Committee until 2013, points out that despite a plethora of major misdemeanours uncovered at UK banks in recent years, senior executives at these institutions have largely escaped serious punishment. Their misconduct ranged from interest-rate manipulation, to sanctions evasion and industrial-scale misselling.

“No bank has lost its banking licence. No senior [executive] has gone to jail. No management team has been prosecuted. No board or supervising executive has been financially ruined,” says Mr Jenkins. “Many have kept their jobs, their pensions and their perks.”

This week the Financial Conduct Authority (FCA) found Barclays guilty of helping wealthy clients avoid criminal activity checks in 2011. The bank was hit with a £72m fine. No individuals were disciplined.

Mr Jenkins, a former banker and fund manager, also argues that regulators are still allowing big banks to operate with pitifully small safety buffers (known as their “capital”) , so even relatively small losses on their loan books could leave them insolvent and effectively force the Government to rush to the rescue to prevent economic catastrophe.

“Capital and accountability have framed the regulatory response [to the 2008 financial crisis]. Yet seven years on banking leverage remains high and accountability low. Sadly, the courage to address either seems lacking,” says Mr Jenkins. “Without penalising perpetrators and their seniors we will not get better behaviour. And without greater courage from policymakers and regulators we will get more of the same.”

The Chancellor, George Osborne, said earlier this year that he wants a “new settlement” with the City, which was widely interpreted as giving the financial sector an easier time.

In July Mr Osborne dismissed FCA head Martin Wheatley, who had been regarded as one of the more proactive regulators.

Last month the Treasury also watered down the new Senior Managers’ Regime, designed to hold top banking executives personally accountable for wrongdoing.

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