Senior bankers in Britain could face the lengthy jail term if their bank fails and they are subsequently found guilty of “reckless misconduct”, draft laws published on Tuesday said.
The sentence was included in a wide-ranging set of proposed amendments to the Banking Reform Bill which the coalition government is seeking to enact in the wake of the financial crisis.
Jail terms were proposed earlier this year by the Parliamentary Commission on Banking Standards and the government has now taken on board the proposals and created draft legislation.
“During the financial crisis and in recent years, the reputation of the City of London took a real knock,” financial secretary to the Treasury Greg Clark said at the Conservative party’s annual conference in Manchester.
“I think it is particularly important for a City of London whose reputation throughout centuries has been based on integrity, on trust, on probity that we should move further and faster than others to restore it.”
The government said in July it would back most of the panel’s recommendations and on Tuesday laid out the 86 changes it wants to make to the current draft bill to implement them. If approved, these could become law early next year.
The harsher penalties for mis-managing key financial institutions are part of a plan to prevent a repeat of the 2008 financial crisis, which saw Royal Bank of Scotland bailed out and Lloyds forced to merge with HBOS before subsequently needing a bailout of its own.
“Today’s amendments mark the final part of the government’s plan for the biggest ever overhaul of the UK banking system,” a finance ministry spokesman reportedly said.
Led by Conservative lawmaker Andrew Tyrie, the Commission produced its final 500-page report in June. Chancellor George Osborne said the government accepted its main recommendations, although he did not agree with some proposals.
