MPS demand bank bosses pay for actions

MPs yesterday joined calls for a change of law to ensure failed bank bosses are punished for reckless decisions, writes James Salmon.

Lamenting the failure of the Financial Services Authority to take action against former directors at Royal Bank of Scotland, the Treasury Select Committee called for a law to ‘improve the effectiveness of the enforcement regime’. But it warned stricter sanctions could breach human rights laws.

Its report, published today, said it was ‘a matter of considerable regret’ that most of the disgraced former RBS directors, including chief executive Fred Goodwin, have not been ‘held meaningfully accountable’ for its failure.

Goodwin was stripped of his knighthood this year but has escaped further censure. This is despite being slammed by the FSA for reckless decision-making and poor management in the run up to the lender’s collapse in October 2008.

The Treasury Committee report, which assessed the FSA’s internal investigation into its handling of the affair in 2011, said: ‘Mechanisms are needed to ensure that the CEO of a failed bank can be ultimately held responsible for failures that occur within their organisation.’

But the report said it recognised the potential difficulties of pinning blame on directors for poor decisions through ‘strict liability’ legal sanctions.

‘This approach raises complex legal issues relating to burden of proof and human rights. It might in particular cases result in injustice, and might discourage some high quality and high integrity people from being willing to work in banks, given the large personal liability involved,’ it said.

MPs called on the FSA to publish a similarly detailed report into the failure of Lloyds Banking Group after it took over HBOS in 2008.