Chancellor George Osborne has pledged criminal penalties for reckless bankers and tighter control on bonuses as he set out the Government’s response to a landmark parliamentary commission.
But he rejected its advice to abolish UK Financial Investments, which handles State holdings in Royal Bank of Scotland and Lloyds Banking Group. Its role came into focus when RBS chief executive Stephen Hester quit last month amid rumours he had been forced out by the Treasury.
Commission proposals to be added to this autumn’s banking reform Bill include a new offence of “reckless misconduct“ by senior bankers, with a jail sentence. Mr Osborne also backed moves to let bonuses be deferred for up to 10 years and enable 100% bonus “clawback“ when banks are propped up by the State.
Labour accused the Government of ducking radical reforms and demanded ministers explain how taxpayers’ interests will be protected when the State’s stakes in Lloyds and RBS are sold. The commission, chaired by Tory MP Andrew Tyrie, was set up by the Chancellor after the financial crisis and Libor rate rigging.
Mr Osborne said: “The Government is determined to raise standards across the banking industry to create a stronger and safer banking system.”