Keeping Bankers Honest
Last week the UK's Prudential Regulation Authority and Financial Conduct Authority published consultation papers aimed at making bankers more responsible and accountable for their behaviour. Proposals in the papers include a 'hippocratic' oath for bankers, deferred bonuses, and clawback of bankers' bonuses. The Bank of England's press release is here and consultation papers are here and here.
In my new book, Banking in Crisis, I argue that British banking was very stable whenever bankers and bank shareholders were held to account. However, it wasn't regulators and rules holding them to account: rather, it was the fact that bank shareholders and directors didn't have limited liability that kept them honest.