Bank of England governor Mark Carney insisted new rules will still make top bank bosses more accountable for failings despite scrapping controversial “guilty until proven innocent” plans.
In a hearing with MPs on the Treasury Select Committee, Mr Carney claimed the changes being made under the new Bank of England Bill would be a “major innovation” and will herald a cultural shift in the banking industry.
His comments come after accusations that the Bank and Treasury had bowed down to intense lobbying by major lenders, shelving the so-called reverse burden of proof rule.
The plans would have seen bankers forced to prove they did not know about wrongdoing within their institution or had tried to prevent it, but have instead been replaced with a “duty of responsibility”.
It will now be up to regulators to prove managers failed to take reasonable action to prevent breaches or failures.
Mr Carney said the Bank was concerned the previous plans would allow banks legal loopholes to side-step accountability, but said the changes will ensure there is a change in culture.
He said: “If you are running a bank you are responsible for the big activities within that bank.
“If you are not comfortable with this responsibility then you shouldn’t be in that role.”
The new Senior Managers and Certification regime, due in March, will be extended to all financial services firms by 2018.
It is seen as an attempt to rebuild public trust in an industry blighted by numerous scandals in recent years, although it is thought the City has claimed a victory in seeing the burden of proof rules watered down.
This follows other recent changes seen as appeasing the City, with the banking levy being reduced in favour of a less onerous banking surcharge, as well as changes in proposals to ring-fence retail operations from riskier investment banking.