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The Emperor’s new clothes

The popular new reckless endangerment law will only bite bankers in special circumstances. A legal redefinition of banking is one alternative which may be more effective, suggests Nicholas Cropp

7 June 2013

The Parliamentary Commission on Banking Standards, established in the wake of the LIBOR rate-rigging scandal, has turned its attention in recent weeks to a populist proposal: that bankers who behave recklessly be subject to criminal sanctions, that there be an element of personal responsibility in the making of catastrophically bad decisions. New legislation criminalising such conduct would prospectively be modelled on US health and safety legislation, which allows public safety professionals to be prosecuted for taking decisions which endanger the public. In principle, it's a difficult proposal to reject. Bankers should be made to share in the consequences borne by those who suffer financially because of their mistakes. In practice, however, any such law may only bite in extreme circumstances, meaning the main impact of such legislation may simply be to make bankers a little more risk-averse; perhaps the intended consequence in the long term.

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