Banking Commission: Andrew Tyrie's findings in his own words Risks and rewards in banking have been out of kilter. Given the misalignment of incentives, it should be no surprise that deep lapses in banking standards have been commonplace. The health and reputation of the banking industry itself is at stake. Many junior staff who may have done nothing wrong have been impugned by the actions of their seniors. This has to end. Rewards for success should be better focussed on generating long-term benefits for banks and their customers. Where the standards of individuals, especially those in senior roles, have fallen short, clear lines of accountability and enforceable sanctions are needed. They have both been lacking. It is not just bankers that need to change. The actions of regulators and Governments have contributed to the decline in standards. Governments need to get on with the job of implementing these reforms. Regulators and supervisors need rigorously to enforce them. We need better regulation: this may mean less, not more. And we need a better functioning and more competitive banking industry. High standards will strengthen Britain as a global financial centre. International co-ordination, while desirable, should not be allowed to delay reform. We must get on and do what is right for the UK. On individuals Personal accountability is little more than an illusion in many parts of banking, especially at senior levels. For too long, senior figures have appeared to be beyond enforcement. Replacing the discredited Approved Persons Regime with the Senior Persons Regime would create meaningful lines of personal accountability, changing behaviour and making enforcement against individuals easier. The introduction of a licensing regime would empower the regulator to judge those whose behaviour could seriously harm the bank, its reputation or its customers, against a new set of Banking Standards Rules. On sanctions Under our recommendations, senior bankers who seriously damage their banks or put taxpayers" money at risk can expect to be fined, banned from the industry, or, in the worst cases, go to jail. That has not been the case up to now. Under the Approved Persons Regime, enforcement action at senior levels has been very rare. The regime looked good but achieved little. Our recommendations would create new clear lines of accountability and assign responsibility to specific individuals. Senior bankers would be on the hook. Regulators need fully to deploy their enforcement powers in order to improve standards. These recommendations make it much more straightforward for them to do so but they would still need to show the will. Those responsible for failure, or whose actions do serious harm to their bank, its reputation or its customers, should know that they will be fully held to account for their actions. When their bank is enforced against, the key individuals would now be made to prove that they had taken took all reasonable steps to mitigate the risk. On remuneration The scale of remuneration in banking, the way it has been set and the form in which it has been paid have all incentivised misconduct and excessive risk taking. The rewards for fleeting, often illusory, success have been huge, while the penalties for failure have been much smaller, or non-existent. Many bankers were on to a one-way bet. Unlike unlimited liability partnerships, they had little or no skin in the game. Recent attempts at reform, many of which were industry-led, have recognised the misaligned incentives of the past. But they haven't done enough. Government and regulators should not set levels of remuneration. However, much more radical steps are needed to incentivise better behaviour among all staff whose actions or behaviour could seriously harm the bank, its reputation or its customers. Deferred remuneration for executives should not be viewed as an entitlement. People should keep their deferred bonuses only when it is clear that they have really been earned. If a bank requires direct taxpayer support, the regulator should have the discretion to forfeit the remuneration of those responsible. Variable remuneration is inappropriate for non-executives. On corporate governance Very serious flaws in corporate governance have been exposed by the financial crisis. Banks whose board-level governance arrangements ticked all of the regulatory boxes and appeared capable of exercising effective control and oversight proved woefully inadequate. The introduction of the Senior Persons regime would ensure that the direct personal responsibilities of board members, and particularly the Chairman, reflect the importance of their roles. On whistleblowers Blatant and widespread wrongdoing has occurred in several banks without anyone blowing the whistle. Something is very wrong. Whistleblowers can often feel extremely vulnerable. They need much better protection by board members and regulators. On regulators Serious regulatory failure contributed to a decline in banking standards. Regulators tell us they have moved away from the failed box-ticking approach of pre-crisis regulation. In future, there must be a much greater emphasis on judgement and more work by Parliament to ensure that the exercise of these regulatory judgements is scrutinised. "The recommendations contained in this Report - particularly the ability to impose "special measures" on individual banks where serious failings in standards and culture have been identified - will help empower regulators and provide them with the practical tools they need." On the financial sector There is a lack of meaningful competition in retail banking in the UK. Customers are losing out. Competition and effective market discipline can and should play a major role in bringing about higher standards. They can do much of the heavy lifting and help avoid onerous or flawed regulation. But further, radical reform may be needed if the changes currently being implemented, such as 7-day switching, fail to have the desired effect. The current state of RBS creates problems for banking competition and for the British economy. Further restructuring may well be needed. The Government may need to be bold. Political considerations must be put to one side. The merits of all available options, including a "good bank / bad bank" split, need urgent examination by the Government. If the operational or legal obstacles are insuperable, the Government should tell Parliament why.