LONDON (Reuters) - New proposals to improve standards and culture within UK banks will be thrashed out by British lawmakers in important meetings next week which could shape the industry for years to come.
The Parliamentary Commission on Banking Standards, led by Conservative Andrew Tyrie, was set up by the government last July after Barclays (BARC.L) was found to have manipulated global interest rate benchmarks, sparking public outrage.
After months of compiling evidence from former and current bank executives, regulators, central bankers, academics, politicians and consumer rights activists, the committee is putting the finishing touches to a 600-page report and will debate it on Monday and Tuesday, industry and political sources said.
One of the areas which will be most intensely debated will be the future of RBS, 81 percent-owned by the government.
Some members of the commission, including former British Finance Minister Nigel Lawson, want the bank to be broken up, with its toxic assets hived off into a 'bad bank', leaving the resulting 'good bank' better placed to increase lending to British households and businesses.
But others are concerned that not enough evidence has been considered on the matter. Outgoing Bank of England Governor Mervyn King brought the issue to the fore by recommending a breakup of RBS in the last of 73 sessions in which he gave evidence to the committee as part of its industry-wide review.
Commission sources have said the report will put forward such a move as an option but will not make a definitive recommendation on whether it will be implemented.
The commission's final proposals will suggest there is not enough competition within the industry, the sources said, and that Britain's major banks are still not adequately regulated.
"One of the key issues is that the major banks are too big and too complex to be able to provide effective corporate governance," one commission member told Reuters.
Ways to create new banks and foster competition in the industry will be considered by the committee. Suggestions by some members that customers switch accounts more easily and start-up banks carry less capital are already being implemented.
The commission may also recommend a review into the viability of an industry-wide IT platform, which would enable customers to keep their account numbers when they change banks.
Excessive pay will also be tackled: the committee will likely recommend tougher sanctions against executives associated with failed banks to stop them working in the industry again.
The commission is aiming to publish the report on June 17, according to one source, two days prior to British Finance Minister George Osborne's annual Mansion House policy speech to London's financiers. A spokesman declined to comment.
So far the committee has achieved a success with Osborne adopting its proposal to give regulators the power to break banks up if they abuse new rules designed to protect retailers' deposits from riskier investment activities.
Reporting by Matt Scuffham; Editing by Sophie Walker