The Government has today pledged to scrap the “failed” approved persons regime for all regulated financial services staff in sweeping reforms of the industry.
In its response to the parliamentary commission on banking standards, published today, the Government says it will work with the Financial Conduct Authority and Prudential Regulation Authority to introduce a new regime.
The change will come as an amendment to the banking reform bill currently progressing through the House of Commons.
The commission recommended introducing a senior persons regime and licensing regime only for bankers but the Government says it would be simpler to address the whole financial services industry.
The senior persons regime would see senior staff subject to a more rigorous registration process while more financial services staff will be covered by the licensing regime than the current authorisation process.
The Government response states: “While the Commission’s recommendations relate to standards in the banking sector, they consider it plausible that the weaknesses of the approved persons regime affect not just the banking sector but other parts of the financial services industry too.
“The Government agrees with this and notes that many of the failures identified by the Commission were not limited to the banking sector.”
The Government has pledged amendments to introduce a criminal offence for reckless bankers. It will also allow regulators to delay bankers’ bonuses for up to 10 years, plus 100 per cent clawback on pay and pensions for executives at failed banks.
The response also backs introducing a secondary competition objective to the Prudential Regulation Authority and examine a shake-up of the payments system to encourage account switching.
However, the Government has refused to budge on the commission’s recommendation to strengthen banks’ leverage ratios and bring it in sooner. The financial policy committee will be given the power to vary leverage ratios from 2018.
There was also no specific action on whistleblowing but only that it would consider it as part of a wider business review into encouraging whistleblowers.
Chancellor George Osborne says: “Cultural reform in the banking sector marks the next step in the Government’s plan to move the whole sector from rescue to recovery and ensure that UK banks demonstrate the highest standards, and are able to support business and drive economic growth.”
An FCA spokesman says: “We will consider the recommendations in further detail and publish our considered and detailed response in the autumn.”