* UK to adopt most PCBS proposals to improve bank standards
* Reforms include jailing reckless bosses, registers
* Regulator given mandate to support competition
By Steve Slater
LONDON, July 8 (Reuters) - Britain will adopt a raft of proposals aimed at raising standards at scandal-tainted banks, including the threat of prison for reckless bosses and greater scope to claw back bonuses and pensions.
Finance minister George Osborne said on Monday he would implement the main proposals set out by a committee of lawmakers last month, which also include new registers to better monitor bankers' behaviour.
In addition, he said he would set an objective for the main bank regulator to promote competition - even though Bank of England officials said last week that goal was covered by other authorities and it was important not to complicate regulation.
"Cultural reform in the banking sector marks the next step in the government's plan to move the whole sector from rescue to recovery and ensure that UK banks demonstrate the highest standards, and are able to support business and drive economic growth," Osborne said.
Many Britons blame bankers' risk-taking for the 2008 financial crisis and subsequent economic slump, and their anger was further fueled by bumper pension pots for failed executives, fines from regulators for most of the top banks, and a mis-selling scandal on millions of insurance products.
Britain's Parliamentary Commission on Banking Standards (PCBS) was set up last year after Barclays was fined for rigging interest rate benchmarks.
Following the endorsement by Osborne, its key proposals will now be added to the banking reform bill currently in parliament.
Osborne said the clampdown on behaviour was the third leg of improving Britain's "flawed financial system", following the overhaul of regulation to give power back to the Bank of England (BoE) and making big banks restructure and hold more capital.
But some lawyers said some of the proposals were playing to the public clamour for action and may have limited real impact.
"Proposing that reckless bankers will go to jail undoubtedly chimes with public opinion. However, proving that an offence of reckless misconduct in the management of a bank as a criminal offence will be incredibly difficult," said Alistair Graham, litigation partner at law firm Mayer Brown, suggesting the number of individuals prosecuted may be small.
Osborne said he would work with regulators to better align bankers' pay with their performance, which could allow bonuses to be deferred for up to ten years and allow all of a bonus to be clawed back when a bank receives taxpayer help.
He also supported a plan to adopt two new registers for senior bankers and other employees, which will ensure that the most important responsibilities at banks are assigned to specific individuals and give the regulator more time and scope to take disciplinary action.
Osborne said he aimed to increase choice in the industry by giving the Prudential Regulation Authority (PRA), the new industry watchdog at the BoE, a secondary objective to improve competition, and by asking a new payments regulator to study how easy it is to switch accounts and consider if big banks should give up ownership of the payments systems.
Senior BoE executives were not keen to give the PRA a secondary objective on competition, however, telling lawmakers last week the Financial Conduct Authority already had the power to look at that area.
"Beware of asking the regulators to do too many things in one body," said Paul Tucker, BoE deputy governor.
Osborne had already backed the PCBS's proposal to consider breaking up state-backed Royal Bank of Scotland and has appointed advisers to assess if its toxic assets - mainly in Ireland and commercial real estate - should be put into a "bad bank" and run down.
He reiterated the government would not put any more capital into RBS.
Osborne did not accept all the PCBS proposals, and refused to abolish UK Financial Investments, the body that handles Britain's stakes in RBS and Lloyds.