Jail Reckless Bankers?

grizzly1911

Jail reckless bankers, standards commission urges

The commission was highly critical of aspects of the banking industry
Big Banking



Senior bankers guilty of reckless misconduct should be jailed, a long-awaited report on banking commissioned by the government has recommended.


http://www.bbc.co.uk/news/business-22954586


Will they really go after the big fish?


How easy is it to prove who requested what?

Generali

Record keeping rules in banks are pretty strict. Most stuff has to be kept for 5 years which means that banks were able to deatroy everything prior to 2007 last year. Who would have guessed it.

TBH most banks are lousy at destroying stuff so there will be ton of evidence, the trouble is proving a crime. If I structure a deal that is 'properly' modeled and to which S&P give the senior tranch a AAA rating which then loses me hundreds of millions, who has committed a crime?

If I lend to profitable corporations in Aus (as RBS did) or overpay for a competitor in a takeover (happens all the time) or seize a quick opportunity to take over a troubled rival without doing proper due diligence as there isn't time (Lloyd's and Coop spring to mind) have I committed a crime?

Bad stuff was done. Proving criminality is a very different thing. Securing convictions against rich, motivated and clever people is harder still. Presumably bankers still get a fair trial...?

shortchanged_2

You bet they should be jailed.

Much of what has gone on in the banks over the past few years is nothing short of fraud on a massive scale.

If the man on the street is hauled over the coals for fraud then so should dishonest bankers.

CLAPTON

What is the difference between reckless and highly successful except the outcome?

angrypirate

Bankers who are breaking the law can already be jailed. Banking is ultimately a game of risk. As long as they play by the rules, let them be as reckless as they want to be.

ILW

I can see an argument for limiting limited liability once above a certain pay level.(Say £500,000).

A measure of personal responsibilty for poor decisions which would kick in if a company folds with unpaid debts.

pqrdef

As I understand it, the principle being stated here is that the banks - big ones anyway - must recognise their power and act accordingly. They can't one minute be wielding their influence at the Treasury (how many meetings?) and making decisions that can blight the lives of millions for years, and then the next minute claim to be purely private bodies whose affairs are nobody's concern but their own.

So directors will have a primary responsibility to society, above that to shareholders (who of course are members of society anyway, so have other interests besides their dividends).

People are already saying this needn't be restricted to just banks. All large companies should have to recognise a public responsibility. For me, all large companies should have to have public directors, not appointed by shareholders.

One advantage of all this is that sounder decision-making structures will have to be followed, because CEOs will be on very thin ice when a decision goes pear-shaped if it turns out that they railroaded it through in the face of opposition.

Another advantage is that companies will be better able to resist improper pressure from the government. A threat of conviction might have put enough backbone into the Co-op Bank board to have prevented the Britannia disaster.

ILW

Oddly enough I believe that in some banking code, a bankers first responsibility is to protect its depositors money. That appears to have been widely breached and may be cause to prosecute.

Generali

ILW wrote: »

Oddly enough I believe that in some banking code, a bankers first responsibility is to protect its depositors money. That appears to have been widely breached and may be cause to prosecute.

At the same time a bank director has a fiduciary duty to shareholders. They need to make as much money as they can for shareholders.

Banking is largely about risk and reward; you can no more remove risk from banking than you can from road crossing.

A lot of the problems were caused by banks outsourcing risk to ratings agencies. That was a stupid decision with hindsight. I don't recall many saying in 2005 or something that Moody's et al were using broken models.

ILW

Generali wrote: »

At the same time a bank director has a fiduciary duty to shareholders. They need to make as much money as they can for shareholders.

Banking is largely about risk and reward; you can no more remove risk from banking than you can from road crossing.

A lot of the problems were caused by banks outsourcing risk to ratings agencies. That was a stupid decision with hindsight. I don't recall many saying in 2005 or something that Moody's et al were using broken models.

Is not protecting depositors money the first priority though?

grizzly1911

ILW wrote: »

Is not protecting depositors money the first priority though?

As ashareholder and part owner I would expect the executives to be protecting my position and earning me a return as their priority.

That isn't to say they have to be reckless to achieve it or be free and loose with our liabilities.

Tortoise and Hare come to mind.

Payments by results doesn't really help when those in charge "construct" evidence to demonstrate they are performing.