The commission reckons bankers have had a no-risk pass to eye-watering remuneration, without restraints on irresponsible behaviour, for too long. Big payouts if they win, no personal skin in the game if they lose.
Its recommendations for rectifying this state of affairs are brisk, while staying on the right side of brutal. A new criminal offence should be put on the statute book for senior persons guilty of reckless misconduct in managing a bank, with the worst offenders, to paraphrase, being liable to be slung in jail for it.
On bankers being seldom knowingly under-remunerated (or appropriately “compensated” as the deluded industry call it), much more of the bonuses package should be deferred and for much longer than the current three years, the report says. Indeed, the regulator should have the power to require up to a ten-year deferral of payouts, the commission – whose findings have presumably been blessed by the Archbishop of Canterbury, one of its members – urges. Regulators should also have the ability to limit or ban the use of sales-based incentives, although, to be fair, the banks have been going down that route steadily in the wake of controversies such as personal protection insurance (PPI).
Commission chairman Andrew Tyrie and his colleagues also call on the government to allow regulators to strip errant senior bankers of everything from outstanding bonuses and pension entitlements to change-of-control golden goodbyes if a bank needs taxpayer support.
On a more company specific level, the report presses Chancellor George Osborne to look at the practicality of splitting Royal Bank of Scotland, still 81 per cent owned by the taxpayer, into “good” and “bad” banks.
Even though Osborne reckons it would be more trouble than its worth at this stage of the RBS re-privatisation game, the commission clearly believes the idea has enough prima facie merit as to attract analysis rather than political instinct or expediency.
There is an echo in the report of Sarbanes-Oxley in the US early in the new millennium in the wake of corporate scandals such as Enron.
A key element of the SarBox legislation was that company executives were made personally liable for signing off accounts, not just being able to hide behind hired accountancy hands.
The banking commission is asking for a new “senior persons regime” to be embedded in UK banks, making specific individuals personally responsible for specific areas of decision-making and standards within banks.
The aim is clearly to stop individuals on bank boards and underlying executive committees sheltering from the regulatory rain under the umbrella of collective responsibility.
It will be interesting to see how much the government acts on the recommendations, how much it rejects, and how much it kicks into the long grass until the other side of the 2015 general election.
Osborne is due to give his first public take on the report in his set speech to the City’s Mansion House tonight.
Nothing in this world is perfect, but the report is detailed, with tangible remedies. It deserves to be commended and implemented to a large degree.
If not, why have the commission in the first place?