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MPs warned off strict liability for directors

MPs have been warned that introducing strict liability for directors of financial institutions will make it harder to get people to take up roles on boards and lead to big increases in litigation.

The warnings came from the Financial Reporting Council and Sir David Walker, who was one of the people brought in to help the FSA draft a report into the failure of Royal bank of Scotland. That report said introducing strict liability for directors would help strike a new balance between risk and reward in financial institutions.

Giving evidence to the Treasury select committee this morning, Financial Reporting Council chairman Baroness Hogg said: “So far, the warning you would have to be totally insane to go on the board of a company let alone a financial institution might lead to a dearth of candidates. There is a danger if you go down this route you would make the pool rather more shallow.”

Morgan Stanley senior adviser Sir David Walker said: “I would argue against the idea of strict liability for directors of financial institutions. It would drive people away. I am not a lawyer but how all that would operate in the courts means the only thing that would be certain is there would be a mountain of litigation.”

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  1. Strummerville 22nd May 2012 at 1:57 pm

    “I would argue against the idea of strict liability for directors of financial institutions”

    says the spokesman for a financial instituiton and a former director.

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