The Banking Standards Report: The new offence of reckless misconduct


One of the headline points as far as FI/D&O insurers are concerned is that the Government plans to introduce a new criminal offence of reckless misconduct in the management of a bank, through planned amendments to the Banking Reform Bill in the autumn.

The offence will be limited to senior individuals at a firm who are covered by the new Senior Persons Regime as persons with responsibility for managing the business and the key risks that the firm faces. The Government accepts that the offence will need to comply with the ECHR.

Significantly, the Government proposes to take forward a recommendation by the Commission that Senior Persons should be held to account for contraventions of regulatory requirements in their areas of responsibility unless they can demonstrate that they took all reasonable steps to prevent the contravention occurring or continuing. This reverses the traditional burden of proof, as the burden is on the individual to show their lack of culpability. The plans will also involve an extension to the time limit for commencing disciplinary action against Senior Persons.

Measures such as the introduction of a new criminal offence only serve to underline the high levels of scrutiny that senior banking personnel can expect to come under in the future. The reversal of the burden of proof will put significant pressure on any senior individual whose conduct comes under examination and the burden for such individuals to demonstrate that they fulfilled all their duties can be expected to increase the costs incurred in relation to any investigation or prosecution which are likely to flow through to D&O insurers.

CMS Cameron McKenna LLP has experience of both advising FI/D&O insurers and acting for directors in the defence of claims by regulators or others. Please let us know if you would like further information about the proposed new offence or changes to the regulatory regime for senior banking personnel more generally.