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‘Reckless’ British bankers could face jail time

Proposals to lift standards OK’d by government

Chancellor of the Exchequer George Osborne said cultural reform is needed.

AFP/Getty Images/file

Chancellor of the Exchequer George Osborne said cultural reform is needed.

LONDON — The British government backed a set of recommendations on Monday to improve standards in the banking industry, including measures that could have bankers in Britain facing prison time for poor business decisions.

George Osborne, the chancellor of the Exchequer, said the government would adopt the wide-ranging proposals presented last month by a parliamentary commission on banking standards. Osborne had asked the commission to come up with ways to improve the banking system and make banking executives more accountable for their actions after the financial crisis and a handful of recent banking scandals.

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“The government is determined to raise standards across the banking industry to create a stronger and safer banking system,” Osborne said in a statement. “Cultural reform in the banking sector marks the next step in the government’s plan to move the whole sector from rescue to recovery,” he said.

The steps are part of the government’s wider efforts to restore trust in the banking sector as a way to support a recovery of the British economy. Osborne said that he hoped a more stable banking system would increase lending to businesses, spur growth, and create more jobs.

A string of trading scandals and continued high pay for some of Britain’s bankers have led to widespread public anger and prompted the government to look into tightening rules on conduct and pay.

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The government plans to make “reckless misconduct for senior bankers” a criminal offense. Those found guilty could face a prison sentence.

The step would be “a helpful deterrent” against senior executives risking giant losses at banks that would result in a government bailout and cost taxpayers billions of dollars, officials say.

British lawmakers said the new legislation is aimed at making financiers more cautious when deciding on the bank’s strategy and investments.

Public anger in Britain has focused on Frederick A. Goodwin, who managed Royal Bank of Scotland when it went on an ill-advised acquisition spree. He left the bank with a large retirement package as the government had to rescue the bank and the banking system from the brink of collapse.

Osborne also pledged to work with the financial regulators to allow bonuses to be deferred for as many as 10 years and for entire bonuses to be clawed back at banks that required government aid.

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