Banking reform over four decades caused scandals, says IMA

Canary-WharfThe main body representing UK investment management said cultural reform in the banking industry could not be properly addressed without looking at changes

over the past 40 years to banking structure and incentives.

The Investment Management Association (IMA) said in its submission to the Parliamentary Commission on Banking Standards that the financial crisis and recent banking scandals were down to those reforms.

Like other critics of banking, the IMA said underlying incentive structures, which often result in large pay-outs, encourage traders and executives to take more risk and focus on short-term profit as opposed to prudent management and the long-term return on assets.

The IMA also highlighted concerns over interest rate swap sales and believes the Government should review its decision not to follow proposals in preventing derivatives selling by retail banks.

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