The Parliamentary Commission on Banking Standards’ 571-page fifth report covers everything from how easy it should be for consumers to switch bank accounts to how much accountability senior bankers should have.
Responses from the government seem reasonably positive: today Greg Clark, the financial secretary to the Treasury, told the BBC it would be implementing its proposals ‘at a pace’ – with a full response promised within a month.
Not surprisingly for a committee which includes the Archbishop of Canterbury, the report places an emphasis on responsibility: bankers, it says, must shoulder the blame when things start to go wrong. Recommendations include putting a legal onus on senior bankers to demonstrate that if cracks start to show, they should have done everything that’s ‘reasonably required’. Senior bankers should also subscribe to a new set of banking standards, as set out for them by the regulator.
It also makes the suggestion that bankers’ bonuses to be deferred for ‘up to 10 years’, to make it easier to ‘claw back’ bonuses if the bank’s long-term performance isn’t up to scratch.
Admittedly, bonuses are a contentious issue – but as one pundit pointed out, they’re also supposed to be incentives. Even the most forward-planning among us would find it hard to be motivated by a payment that’s due in a decade’s time.
This focus on responsibility is all very zeitgeisty – and links neatly with arguments around corporation tax and what companies’ responsibilities are around that. But, as Reuters editor-at-large Hugo Dixon points out, that could lead to a huge talent drain in the top tiers of financial services firms.
2 Why would anybody good sit on a UK bank board if government accepts #tyrie suggestions to make reckless bank management jailable?— Hugo Dixon (@Hugodixon) June 19, 2013
Then there’s the small matter of government-owned banks, and how they should be sold off. The differences in opinion between those on the committee was commented on pretty frequently in the lead-up to the release of the report: Archbishop Justin Welby is said to favour the idea of turning them into a series of regional banks while the committee’s chairman, Andrew Tyrie, prefers the idea of splitting them into ‘good’ and ‘bad’ banks.
Whichever option the chancellor decides to go for, the report cautions that rushing the privatisation of Lloyds and RBS would mean taxpayers didn’t get the value they deserved. Although Hester-gate has made it pretty clear that George Osborne wants to get cracking on privatisation sooner, rather than later.
Elsewhere, the report criticises regulators for failing to spot signs of an impending financial crisis in 2008, and suggests that if either the Financial Conduct Authority or the Prudential Regulation Authority notice anything suspect at a bank, it should be put into ‘special measures’. It also recommends that the chancellor sets more risk-averse capital ratio rules for banks.
So the report is largely encouraging – although Lord Myners, the former Labour City minister who has been very vocal throughout the process – points out that not much will change for several years.
Despite Clarke’s optimism, though, the big question is how much of this will be implemented – and when. The trouble with the report is that its sheer breadth makes it easy for the government to respond to the easiest recommendations, while forgetting about the rest - and still claiming to have followed it. In other words - it can easily say it's done something while not actually doing very much at all...