| LONDON, June 19
LONDON, June 19 The Bank of England (BoE) is
determined to improve business standards at banks, and has
already forced an unidentified firm to limit its lending and
deposit-taking until it met regulatory requirements, it said on
Policymakers and regulators see changing the business
culture at banks as essential to lasting reform in an industry
that had to be bailed out by taxpayers during the 2007-09
The BoE's supervisory arm, the Prudential Regulation
Authority (PRA), on Thursday set out how it already has - and
will in future - use its powers to enforce change in an industry
tarnished by scandals over mis-sold products and the rigging of
benchmark interest rates.
In a policy statement, the PRA said it was looking out for
firms that failed to conduct their business in a safe and sound
way, poorly functioning boards that did not challenge
executives, and inadequate control of risks.
The first step would be to step up the intensity of
supervision, increase reporting requirements and set a deadline
for improvements, it said.
"The PRA may proceed to an enforcement investigation without
having exhausted all other supervisory options," it added.
In June 2013, Britain's parliament published a report on
banking standards that made several recommendations, including a
new professional body and more women on trading floors.
It also called for a "special measures" tool for regulators,
but the BoE said at the time that no new tools were needed and
the PRA statement set out how existing tools could be used.
The PRA said it expected banks to cooperate in resolving
cultural issues but wouldn't hesitate to use formal powers if it
felt a lender wouldn't respond appropriately.
The watchdog could appoint an outside person to review
operations at the lender's cost, or if a bank's board or top
staff lacked the necessary skills, deposit-taking could be
barred for six months, it added.
The PRA gave examples of where it had already used its
powers to improve standards, such as ordering a firm to put in
place committees to tackle regulatory concerns or requirements.
It has also appointed an outside person, reporting directly
to the PRA, to oversee compliance with its requirements.
A firm also agreed to limit its balance sheet growth -
essentially lending and/or deposit-taking - to a set percentage
a year until the watchdog was satisfied that more robust
governance structures were in place.
The PRA did not identify any of the firms in its examples.
Martin Wheatley, chief executive of the Financial Conduct
Authority, launched last year to crack down on bad behaviour at
banks, has said top bank executives were getting the message but
that it had yet to fully trickle down to lower levels.
The most dramatic attempt to change a bank's culture came in
July 2012 when the BoE pushed out Barclays' chief
executive Bob Diamond a month after the lender was fined for
rigging the Libor benchmark interest rate.
(Editing by Mark Potter)