BAD bankers should face jail for a new offence of "reckless misconduct" and rewards for failure must end, according to a report published today.
The report from Westminster's high-powered Banking Commission seeks to create a new culture of responsibility and accountability among Britain's much-derided top bankers.
It points out that at its peak the public helped out the crisis-hit banking industry to the tune of £133 billion, more than £2000 per person in the UK.
The commission says senior bankers should be personally responsible for malpractice, with a criminal offence of reckless misconduct in the management of a bank carrying a jail sentence.
It says excessive pay and rewards for failure must be ended, with regulators able to defer bonuses for 10 years. Bankers should be licensed and have to sign up to a set of banking standards.
On the Royal Bank of Scotland, the commission of peers and MPs says the institution is still wounded but calls for analysis by September of plans to split it into a privatised good bank and a nationalised bad bank.
The parliamentary body attacks the UK Government for its "political interference" in RBS and the similarly state-owned Lloyds Banking Group, and calls for UKFI, the body in charge of managing the taxpayer stakes, to be scrapped.
The commission's report comes ahead of George Osborne's annual Mansion House speech tonight at which he is expected to say how he intends to reform banks and outline returning RBS and Lloyds to the private sector.
Recently, RBS bosses said the bank would be fit to return to the private sector within 18 months but there are fears the move will be politically driven ahead of the 2015 General Election and taxpayers could lose their 81% stake.
Shares at around 323p are still significantly below the 500p break-even price for the £45bn bailout.
Yesterday, Mr Osborne denied forcing Stephen Hester to quit as head of RBS. However, the Commission accuses the Government of interfering in the running of the two partly state-owned banks, RBS in particular.
Commission chairman Andrew Tyrie said banking scandals such as Libor rate-rigging, which sparked the creation of the commission, exposed "shocking and widespread malpractice", and trust in banking had fallen to a new low.
"A lack of personal responsibility has been commonplace throughout the industry. Senior figures have continued to shelter behind an accountability firewall. Risks and rewards in banking have been out of kilter - deep lapses in banking standards have been commonplace," said the Conservative backbench MP.
Mr Tyrie added: "Rewards for success should be better focused on generating long-term benefits for banks and customers - clear lines of accountability and enforceable sanctions are needed."
Ed Balls for Labour said the Commission had laid out a radical blueprint for reform and it was "vital for the Government and the banks to rise to the challenge".
The Treasury welcomed the Commission's recommendations and said: "Where legislation is needed, we have said we will support it, and the Banking Bill currently before Parliament can be amended to ensure the recommendations are quickly enacted."
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