POLITICS

Bankers Should Be Jailed For Misconduct, Says Osborne's Parliamentary Commission

19/06/2013 08:06 BST | Updated 19/06/2013 08:07 BST
PA
File photo dated 25/02/10 of the 'Gherkin' and Canary Wharf at sunrise in the City of London as the number of new jobs created in the City of London fell by 8\% last month to 2,390, down from 2,610 in April, according to a study.

Senior bankers should be jailed for reckless misconduct whilst managing banks, a parliamentary commission has concluded.

The cross-party group's fifth report attacked the lack of accountability of bankers and also said some bonuses should be withheld for up to 10 years.

It also called for bankers to be licensed and to sign up to a set of banking standards rules.

The Parliamentary Commission on Banking Standards was set up by George Osborne last year after a scandals rocked the industry.

A Treasury spokesman said the report was a "very impressive piece of work".

"There are many recommendations in it which will help the government's plan to create a stronger and safer banking system," he added.

Osborne will shed light on his plans for the state-owned banks today amid fresh pressure to split up Royal Bank of Scotland (RBS).

The Chancellor is expected to use his annual Mansion House speech to suggest that a sell-off of the taxpayer's 40% stake in Lloyds could start by 2015.

He is also likely to order more detailed work on how to hive off toxic assets from RBS into a "bad" bank after a long-awaited report from the Parliamentary Commission on Banking Standards suggested it could be necessary.

RBS bosses recently insisted it would be fit for a return to the private sector within a year, but there are fears that would mean a big hit for the public purse.

Shares are trading at around 320p - still significantly below the 500p break-even price for the Government on its £45 billion bailout.

The commission said the strategy for returning RBS to the private sector "has been allowed to run for five years", but added: "It is time to look at this afresh."

Tory MP Andrew Tyrie, the commission chairman, urged the Government to put "political considerations" to one side and said it must launch an immediate review of the benefits of splitting RBS.

Under such a plan, the bank's bad debts would be hived off to free the ''good'' bank to lend more to businesses and boost the economy.

Mr Tyrie said: "The current state of RBS creates problems for banking competition and for the British economy. Further restructuring may well be needed. The Government may need to be bold."

Amid mounting concerns over the level of direct Government intervention in the management of the state-backed banks, the commission concluded that UK Financial Investments (UKFI) was increasingly being used as a "fig leaf" to disguise the level of control and should be wound up.

Mr Osborne yesterday denied forcing Stephen Hester to quit as head of RBS, but the commission said in its report the Government has interfered in the running of the two partly state-owned banks, particularly RBS.

"On occasions it has done so directly, on others it appears to have acted indirectly, using UKFI as its proxy," it added.

The report outlined a series of recommendations to raise standards in the banking sector following the Libor rate-rigging scandal.

Shadow chancellor Ed Balls said: "On the future of RBS and Lloyds, it is vital that government decisions are driven by the best interests of the British taxpayer and the wider economy, not a political timetable.

"On RBS in particular, David Cameron and George Osborne must resist the temptation for a loss-making fire sale at the current share price which would add billions to the national debt. As Stephen Hester said last week, RBS is capable of being worth more than what the taxpayer paid.

"Instead the government must look at the whole range of options for the future of RBS to ensure the taxpayer gets its money back and there is no return to business as usual. This should include looking at the case for splitting retail and investment banking at RBS, as the commission proposes."