‘Jail for bankers’ stance softened

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Published: Wednesday 22nd October 2014 by The News Editor

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The Bank of England’s deputy governor has apparently softened its stance on plans to jail reckless senior bankers after a City backlash.

Andrew Bailey, who heads the Bank’s Prudential Regulation Authority (PRA), told MPs that new rules must balance the need for non-executives who sit on bank boards to have better oversight with the need to preserve their independent roles.

His remarks to the Commons Treasury Select Committee contrast with a tough response from Bank governor Mark Carney who said directors unhappy about the new regime ought to resign.

Meanwhile, Mr Bailey opened up a rift with European counterparts by revealing that contrary to its claims at the time, he had voted against a recent ruling by the continent’s banking regulator clamping down on banker bonuses.

His remarks on rules for reckless directors follow reports that two HSBC board members were to quit over Bank proposals which could see senior managers and board members face criminal sanctions over a major banking failure.

Mr Bailey said: “I talk to a lot of board non-executive directors.

“I do get the comments about the burden of responsibility, of expectation, on non-executive directors.

“I think it’s important that we expect more from non-executive directors than we saw in many instances in the crisis, a role that has at its heart, challenge. But we have to balance that against not turning them into full-time servants of institutions.”

His remarks appeared to soften the Bank’s stance after reported comments by Mr Carney in Washington last week, suggesting that those unhappy with the new rules being consulted on by the PRA ought to quit.

Mr Bailey told MPs there had been a “loss of perspective” over the plans to be able to jail reckless bankers saying this should be the “severe sanction that you have got in reserve but is not the main tool”.

Other measure available would include clawing back bonuses.

Mr Bailey also broke with protocol to reveal that he voted against other members in a ruling by the European Banking Authority (EBA) that new types of allowances – paid to bankers after the EU introduced a cap on bonuses at twice salaries – were against the rules.

He told MPs that this came after the EBA had already breached the understanding on not disclosing details of the vote when it “incorrectly transmitted” that the decision in favour of the ruling had been unanimous.

“I spoke to the EBA and said frankly, I am very surprised that you have informed journalists of the vote because I thought that there was the rule of engagement where we didn’t do that and moreover you appear to have informed them incorrectly.”

Andrew Tyrie, chairman of the select committee, said: “It is appalling behaviour on their part, isn’t it?”

Published: Wednesday 22nd October 2014 by The News Editor

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