LONDON, Dec 16 (Reuters) - Britain ushered in a new era of banking industry oversight on Monday when lawmakers gave their final approval to reforms aimed at tackling the structural and cultural failings which led to the near-collapse of the country’s financial sector.
The reforms are the result of a lengthy legislative process started after the 2007/8 financial crisis and a series of mis-selling and rate-fixing scandals which shone a light on illegal and unethical behaviour at some of Britain’s banks.
Among the main features of the bill are rules to force banks to separate their retail and investment activities and a new regime to make senior bankers more accountable - including criminal sanctions if their institution fails.
“This is a major milestone and marks the end of a three-year process, led by the government, to make the UK banking system stronger and safer so that it can support the economy, help businesses and serve consumers,” said Sajid Javid, the minister in charge of the bill.
Javid said the new laws would help improve bankers’ standards of conduct, generate extra competition in the industry and prevent British taxpayers from footing the bill for any future bank failures.
The bill also introduces new rules to make sure bankers’ bonuses are paid over a longer term, to stamp out excessive risk-taking.
The final stage of the legislative process came in the upper house of parliament late on Monday night when senior lawmakers agreed on the technical details of a regime to certify senior bankers.
The package is expected to receive a rubber stamp approval from Queen Elizabeth and become law later this week.
“The Bill is a significant step in facilitating a new dynamic,” said Paul Garbutt, head of UK Financial Regulation at accountants Grant Thornton. However, he said the onus was now on the banks themselves to make sure the laws made a difference.
The driving force behind the legislation was a cross-party commission on banking standards, set up by the government in the wake of the Libor rate-fixing scandal.
Based on evidence from regulators and many of London’s top bankers, the commission produced five reports, culminating in a 500-page set of recommendations released in June.
“We have had this crisis. The horse has bolted, what we have got to do now is devise a stable door that can keep the next horse in,” said Andrew Tyrie, chairman of the Parliamentary Commission on Banking Standards, speaking in parliament last week.
The commission put heavy pressure on the government to adopt its proposed reforms as a whole, and was able to extract concessions on several major issues even after the government was reluctant on some measures.
Last month finance minister George Osborne asked the Bank of England to decide whether it needed more powers to control banks’ risk taking - moving towards a major recommendation from the banking commission which had initially been ignored.