The terms of reference of the Commission are to consider and report on:
a) professional standards and culture of the UK banking sector, taking account of regulatory and competition investigations into the LIBOR rate-setting process;
b) lessons to be learned about corporate governance, transparency and conflicts of interest, and their implications for regulation and for Government policy;
and to make recommendations for legislative and other action.
The Commission, which held its first formal meeting on 24 July, has been asked to report on proposals for legislative action no later than 18 December 2012 and on other matters as soon as possible thereafter. These tight deadlines mean that the Commission requests responses to this initial call for evidence as soon as possible, preferably by Friday 24 August. Further requests for written evidence may follow as the Commission’s work evolves.
The Commission would welcome responses to the following initial questions:
1. To what extent are professional standards in UK banking absent or defective? How does this compare to (a) other leading markets (b) other professions and (c) the historic experience of the UK and its place in global markets?
2. What have been the consequences of the above for (a) consumers, both retail and wholesale, and (b) the economy as a whole?
3. What have been the consequences of any problems identified in question 1 for public trust and in, and expectations of, the banking sector?
4. What caused any problems in banking standards identified in question 1? The Commission requests that respondents consider (a) the following general themes:
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the culture of banking, including the incentivisation of risk-taking;
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the impact of globalisation on standards and culture;
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global regulatory arbitrage;
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the impact of financial innovation on standards and culture;
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the impact of technological developments on standards and culture;
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corporate structure, including the relationship between retail and investment banking;
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the level and effectiveness of competition in both retail and wholesale markets, domestically and internationally, and its effects;
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taxation, including the differences in treatment of debt and equity; and
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other themes not included above;
and (b) weaknesses in the following somewhat more specific areas:
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the role of shareholders, and particularly institutional shareholders;
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creditor discipline and incentives;
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corporate governance, including
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the role of non-executive directors
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the compliance function
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internal audit and controls
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remuneration incentives at all levels;
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recruitment and retention;
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arrangements for whistle-blowing;
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external audit and accounting standards;
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the regulatory and supervisory approach, culture and accountability;
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the corporate legal framework and general criminal law; and
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other areas not included above.
5. What can and should be done to address any weaknesses identified? To what extent are such weaknesses subject to remedial corporate, regulatory or legislative action, domestically or internationally?
6. Are the changes already proposed by (a) the Government, (b) regulators and (c) the industry sufficient? Respondents may wish to refer to the Financial Services Bill and the Government's proposals for the Banking Reform Bill. They may also wish to refer to proposals by the Bank of England and the Financial Services Authority on how the Financial Policy Committee, Prudential Regulation Authority and Financial Conduct Authority will operate in practice.
7. What other matters should the Commission take into account?
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