New UK rules hold bank bosses accountable for misconduct

Fred Goodwin was chief executive of Royal Bank of Scotland when the bank collapsed in the arms of the taxpayer in 2008.

That failure cost him his job, his knighthood and his reputation but he didn't break any laws, nor did any executive at any of the British banks that failed.

Andrew Bailey is the man at the Bank of England who is in charge of ensuring individuals are held accountable for their actions. He told me the law was inadequate.

From today the senior managers and certification regime comes into force along with a new criminal offence of failing to prevent a bank from collapsing.

Henceforth, the regulator can prove that a senior manager agreed to a decision that lead to a bank failing, that he or she was aware of the risk of failure and that their conduct fell far below what could reasonably be expected, then they face the prospect of a prison sentence.

The original plan had been to reverse the burden of proof - to require bankers to demonstrate they had acted properly rather than requiring the regulator to prove wrong-doing.

Mr Bailey says he's happy with the change, he would prefer the FCA, which he is set to lead, to be in charge of a prosecution.

Far from going soft on banks, Mr Bailey believes Britain has one of the toughest conduct regimes in the world. Had the same framework existed in 2008 then the financial crisis in Britain may have been avoided.

Andy Hornby was the boss of HBOS, another bank that nearly collapsed in 2008. Last November a report by the Bank of England was critical of the regulator's failure to investigate him and other executives - not for criminal behaviour but for possible breaches of City regulations.

A new inquiry is underway but Mr Bailey won't say how many of HBOS's former senior managers are involved.

Since the financial crisis bank reform has focused on making executives at the top more accountable and the banks themselves more robust. Last month Sir John Vickers, one of the men tasked with making our financial system safer, accused the Bank of England of watering down his recommendations.

In an interview with ITV News, Sir John said banks aren't being forced to hold back enough capital to absorb future losses.

Mr Bailey told me: "I hope you can respect the fact that we have to come back and say very strongly that no, that is not the case. Our capital requirements are not different to the capital proposed by his commission."

He does however concede that the objective of protecting the taxpayer from future bank failures is still work in progress.

Ensuring banks are stronger and better run undoubtedly helps but we're not quite there yet.

Seven years on from the crisis, banks are still too big to fail, for now.