Thursday, May 13News For London

Jail time for bankers? New regime holds senior managers accountable

By Li Ying & Di Bai

In the wake of HSBC’s tax evasion scandal, the UK Treasury announced a new regime aimed at strengthening control in the banking sector, which will take effect in about a year. From that time on, senior bank managers will be likely to face jail terms for bank failures and misconducts. The Chief Executive of Chartered Institute for Securities and Investment (CISI) Simon Culhane talks to Westminster World and explains the new regime.

CISI: the Professional Body for the Financial Service Industry


Introducing a change of culture in the industry

A new government-proposed regime will usher in a much-needed change of culture in the banking and financial service sector, with more punitive consequences. Simon Culhane, the chief executive of the professional body of the financial service industry CISI, welcomes it. He stresses that the new regime, known as the Senior Managers and Certification Regime, or SM&CR, will be a powerful deterrent armed with new criminal offence.

Senior managers need to be more careful in making decisions, because the new regime will hold them more personally accountable for failings, says Culhane. The new regime imposes onerous obligations on senior managers, who carry a greater risk of regulatory disciplinary action in the event that firm systems and controls are found to be malfunctioning. In extreme cases, a senior manager runs the risk of a criminal prosecution should a bank fail.

Bankers therefore have to take this serious. Culhane advises banking professionals to gain an understanding of how these changes directly affect them. Watch the video below for more details of his view.

Two major government departments were responsible for drafting the new regime: the Financial Conduct Agency (FCA) and Prudential Regulation Authority (PRA).  In August 2014, they handed out the draft proposals to major firms in the banking and financial sector for consultations. Now, seven months on, the authorities are in a position to release a roadmap plan leading to the eventual implementation of the regime in early March next year at the earliest.

What’s wrong with the banking sector…..

The government’s interference has become necessary after the banking sector was shaken by several scandals. Recently, the tax evasion of HSBC’s Swiss private banking arm has damaged the bank’s reputation. The public trust in the UK’s banking sector has been eroded at large. There has been growing concern among the public about what else the authorities can do to deter mammoth banks like HSBC from wrongdoings.

HSBC is a classic example. The bank has a record of paying heavy fines for misconducts. In late 2012, the bank was fined a record of 1.9 billion US dollars for its failure to implement anti-money laundering controls in Mexico. In December 2014, it was fined more than 200 million pounds for manipulating foreign exchange rates. Despite the heavy financial penalties, serious problems still exist.

While the French financial state prosecutor has requested that HSBC’s Swiss private bank be sent to criminal trial, there has been no UK legal investigation into HSBC so far.

These scandals are fuelling up public outrage about big banks’ integrity and ethics in serving the vast majority of the public. Representing the industry, Simon Culhane urges the public to have confidence in the banking sector’s self-healing mechanism.

“The vast majority of the people in the industry looking after the ordinary people during the day. And that’s their main focus.” Simon Culhane stresses.

Watch the video below for more details:

Speaking up, and be listening….

In its Whistleblowing Commission Report released in 2013, Public Concern at Work said that if effective whistleblowing arrangements had been in place, many of the disasters and scandals which have caused so much harm and distress could have been avoided. While encouraging whistleblowers to report industry fraud, Simon Culhane says it’s more important to foster an open culture of “speaking up”.

We don’t like the word whistleblower. We prefer the word ‘speaking up’. What you want is in a company where people are not afraid to say to their direct line manager: do you know, this doesn’t look right. And actually what you want is not only for people to speak up, you want managers to listen. So I say whistleblowing is OK, speaking up is great, but listening is best. You need all three parts. 

Simon Culhane suggests all companies start building a receptive corporate culture by creating an effective induction program for new staffers at work. He stresses that it’s important for every member to feel comfortable to speak up and their concerns are being addressed.

Recent history of banking misdeeds and fines


  • $1.9bn for Money laundering (2012)
  •  $618m for Forex Manipulation (2014)


  • £290m  for Libor rigging (2014)
  •  £330m for Electricity market manipulation (2014)
  • £26m for Gold price fixing (2014)

Lloyds £218m for Libor rigging (2014)

BNP Paribas $8.97bn for Sanction busting (2014)

Credit Suisse $2.6bn for Assisting tax evasion (2014)

Royal Bank of Scotland $634m for Forex Manipulation (2014)

JP Morgan Chase $1bn  for Forex Manipulation (2014)

Citibank $1bn for Forex Manipulation (2014)