Skip to main content


New reckless banking offence comes into force, but can it be enforced?

From 7 March 2016 it became a criminal offence for senior bankers to recklessly cause their institution to fail. Section 36 of the Financial Services (Banking Reform) Act 2013 could, in theory, mean up to seven years in prison for:-

  • a senior manager;
  • who agrees to a decision that caused the institution to fail, and
  • knew it could cause the institution to fail, and
  • whose conduct fell far below what could reasonably be expected.

If this new offence was not greeted by howls of anguish and an immediate stampede out of the City of London, this is perhaps because the banking community have retained decent legal advice. No one is packing their pyjamas just yet.

Gerard Forlin QC of Cornerstone Chambers, says “I would be very surprised if anyone was ever convicted of this offence, but it may well act as a brake on reckless investment and behaviour by white knuckle rider bankers..”

Except potential defendants would, of course, have to be “senior managers”, and so the layers of corporate deniability would remain intact with echoes of the Libor-rigging affair.

Greg Brandman, partner at Eversheds, feels the creation of this offence will largely be seen as a political move and “...the prospect of the Crown discharging the criminal burden of proof in order to satisfy the multiple evidential hurdles required by the new offence are so remote that it is very unlikely this offence will ever be successfully prosecuted”.

Practically speaking and with all due respect to the Crown Prosecution Service, their currently dilapidated state is not tailor-made for scaling shiny new evidential hurdles.

It is not just bankers who are distinctly unperturbed by this rushing out of new offences during a political storm. The fallout from the recent ‘Panama papers’ affair is a case in point. The Prime Minister moved on to the front foot after a "bad week", not by actually changing any tax laws, but by announcing plans for a new offence for companies who fail to stop their staff assisting in tax evasion. Really? Again, there were few howls of anguish from senior management - perhaps because they see the pattern, and know the difference between political appearance and legal reality.

In fact, Jonathan Russell of Rees Russell says the dividing line between tax evasion and tax avoidance have become increasingly blurred and “The underlying problem is the complexity of tax legislation, which enables the people who can afford it to exploit the loopholes that are left. If people utilise those loopholes, should they be criminally prosecuted? Should the professionals who advise them to do so be criminally prosecuted? Should the people who draft the legislation and leave the loopholes be criminally prosecuted?”

As with the line between ambitious investment banking versus reckless risk-taking, these are all good and difficult questions. Which is perhaps why it is much easier to announce new potentially unenforceable offences than it is to actually provide proper answers.

Click here to find out how Brett Wilson LLP Solicitors can assist you if you are subject to an investigation by the FCA.


Legal Disclaimer

Articles are intended as an introduction to the topic and do not constitute legal advice.