Britain Cracks Down on Banks with Tougher Punishments on Financial Scandals

The government is looking to impose harsher punishments on bankers who have engaged in misconduct to help restore public confidence and prevent large-scale financial scandals from happening again in the future.

The Treasury revealed that Whitehall was looking to review punishments.

"For enforcement action to be effective, wrongdoers must believe that they face a real and tangible risk of being held to account and must expect to face meaningful and proportionate sanctions," the statement said.

"The general public must also have confidence that wrongdoers will be subject to sanctions and that the enforcement machinery will be robust enough to deliver those sanctions when wrongdoing occurs."

As part of the review, the government will assess how the Prudential Regulation Authority (PRA) at the Bank of England, and the Financial Conduct Authority (FCA) report to UK Chancellor George Osborne.

It will also analyse whether current punishments, such as fines for individuals, are enough of a deterrent to stop bankers behaving badly in the future.

Whitehall confirmed that it has made a public call for evidence which has a deadline of 4 July this year.

It will also hold round-table discussions over the next month.

The Soft Touch

Politicians had previously criticised British regulators for being 'softer' than their cousins across the pond, in terms of the size and scope of fines and other punishments imposed on those found to have participated in market manipulation or mis-selling scandals.

However, US regulators have recently voiced their dismay over the same issue.

Last month, US Securities and Exchange Commission (SEC) member Kara Stein slammed her own agency for allowing the Royal Bank of Scotland (RBS) and others to break the law by attempting to manipulate some of the world's most important financial markets.

In a scathing statement, Stein said that RBS should have had parts of its US licence revoked after the lender pleaded guilty to criminal charges over one of its units rigging interbank lending rates – Libor.

"We have a rule that confers a special benefit to issuers that have a good track record. And we have a rule that calls for automatically rescinding that benefit when the issuer misbehaves," said Stein, who is also a Democrat.

"Here, the commission waived that common sense rule despite egregious criminal misconduct."

"I fear that the Commission's action to waive our own automatic disqualification provisions arising from RBS's criminal misconduct may have enshrined a new policy — that some firms are just too big to bar."