The British Treasury said new laws by Chancellor George Osborne in force today could also attract unlimited fine if the actions of convicted bank executives cause their institutions to fail.
A Treasury spokesman described the new legal powers as a major milestone in government efforts to reform financial services and to ensure Britain has learnt the lessons of the past.
The new laws in force today apply to senior managers in British banks, building societies or regulated investment firms.
Executives will have committed a criminal offence if they agree to a decision causing a financial institution to fail.
Osborne said: “This government has learnt the lessons of the past. We have reformed Britain’s banking regulation to help build a stronger and safer financial system and introduced new rules that mean individuals working in UK firms face some of the toughest sanctions in the world.
“The new criminal offence, which becomes law today, is the latest milestone in my plan to ensure that the British banking industry operates to the highest possible standard. It is absolutely right that a senior manager whose actions causes their bank to fail should face jail.”
Also coming into force today is a new Senior Managers and Certification Regime (SM&CR). It will apply to banks, building societies, credit unions and regulated investment firms.
The new regime will focus regulatory prior approval on key people at the top of firms with “statements of responsibility” for each senior manager which will mean they have nowhere to hide if their firm breaches regulatory requirements, said a Treasury spokesman. Enditem