Belfast Telegraph

Bank powers may face rights hurdle

Beefed-up powers to hold bank bosses to account over misconduct may need to be watered down because of human rights laws, the Bank of England has hinted.

Plans to reverse the burden of proof on top executives at banks - meaning they would have to prove they were not responsible for failings rather than force regulators to prove that they were - could be affected.

Powers to strip bonuses from bosses at taxpayer-backed banks may also need to be tweaked to ensure they comply with the European legislation.

In both cases, policymakers say that the proposals need to be considered carefully by the Prudential Regulation Authority, an arm of the Bank, to ensure they meet human rights requirements.

The comments emerged in the Bank of England's response to the Parliamentary Commission on Banking Standards. They suggest that lawyers at Threadneedle Street may be concerned that the plans are open to legal challenge.

The commission was set up in the wake of the financial crisis that saw a series of City institutions brought to their knees, and the Libor rate-rigging scandal, raising questions about how the banks operated and were regulated.

Among recommendations were the scrapping of the "approved persons" regime for top management to be replaced with a new "senior persons" structure.

The Government has indicated that such individuals would be subject to a "reverse burden of proof", meaning they would be disciplined for rule breaches in their area of responsibility if they did not take reasonable steps to stop them.

This would turn on its head the conventional requirement for authorities to have to prove a case against an individual.

It would mean that any banker in a position of senior authority, including a chief executive, would have to ensure those working under them did not break rules. Otherwise the boss would face being forced to stop the breaches, or a separate penalty, himself.

But in its response, the Bank warned: "The use of remedial requirements or enforcement action must reinforce the deterrent effect of the new regime without encroaching upon human rights.

"The PRA (the Bank's Prudential Regulation Authority) is considering these questions closely with the Treasury and the Financial Conduct Authority."

The Bank of England response also homed in on a proposal over powers to impose penalties on state-backed banks - such as Lloyds or Royal Bank of Scotland.

In the event of bank failure, regulators would "have an explicit discretionary power to render void or cancel all deferred compensation", under the proposals.

The Bank's report said: "The PRA will consider how to address this, consistent with European Human Rights provision."