Bankers who behave recklessly could face jail time under a new law currently being debated by members of the UK banking commission, whose final report is due at the end of May.
The debate comes on the heels of a number of banking scandals in the UK, such as the recent Libor scandal. Critics in the UK and in the U.S have also long condemned the fact that bankers and their institutions have not been held accountable for the 2008 global financial meltdown.
According to the Financial Times, several members of the UK commission are now strongly pushing for the new law which would hold bankers personally liable for catastrophic losses.
"Banks benefit from a public subsidy, in that they know they will be bailed out if they fail. I think we want to see a sense of personal responsibility to match that,” one commissioner told the Financial Times.
The banking commission is reportedly divided on the issue of how to punish reckless behavior while encouraging greater industry responsibility.
The London Evening Standard reports that some members of the commission fear that excessively complex rules and laws “would backfire by discouraging a sense of personal duty.”
“The best regulator is when people know instinctively what is right and wrong,” one commission member reportedly said, adding that there was support for the principle of putting the worst culprits behind bars.
Other commissioners said they are in favor of professional regulation similar to the medical profession, rejecting arguments from bankers that the financial industry is too complex.
The FT notes that a new "reckless endangerment" law would be modeled on the U.S system, where executives can be prosecuted for putting public health or safety at risk through decisions taken at work.
Supporters of the proposed law say it would underscore the fact that bankers whose institutions have government support should have more responsibilities than those of executives in other industries.
Naysayers, however, argue that the proposed law could hurt lenders' daily business, and hamper growth by forcing bankers to become overly risk averse in their lending and trading decisions.
Melanie Rodier has worked as a print and broadcast journalist for over 10 years, covering business and finance, general news, and film trade news. Prior to joining Wall Street & Technology in April 2007, Melanie lived in Paris, where she worked for the International Herald ... View Full Bio