Bankers found guilty of "reckless misconduct" in Britain in the wake of the global financial crisis and Libor rate-rigging scandal could end up in prison and stripped of bonuses, under proposals unveiled on Wednesday and set to be enshrined in law.
The proposals come after last year's Libor affair which besmirched the global reputation of the British capital's so-called City of London financial centre and made some bankers the target of public anger.
The Parliamentary Commission on Banking Standards, established by the government made the recommendations in a final report that amounted to a blunt indictment of malpractice.
The reputation of Britain's banking sector has been badly damaged in recent years by a string of scandals, including also credit insurance mis-selling and ongoing controversy over vast bank bailouts during the 2008 financial crisis.
British Prime Minister David Cameron expressed his strong approval when asked whether he accepted the commission's recommendations on bonuses and criminal penalties.
"Yes, I do support both of those measures," he told lawmakers in his weekly question-and-answer session. "Obviously we need to take time to read this excellent report.
"But penalising, including criminal penalties against bankers who behave irresponsibly, I say yes. Also, making sure that banks who are in receipt of taxpayers' money that you can claw back... bonuses, I say yes too."
Cameron added that the coalition government would use the Banking Bill, which is currently going through parliament, to implement the proposals.
The Commission was formed last year after revelations that Barclays bank tried to manipulate the Libor rate, which is used as a benchmark for global financial contracts worth about $300 trillion.
"Under our recommendations, senior bankers who seriously damage their banks or put taxpayers' money at risk can expect to be fined, banned from the industry, or, in the worst cases, go to jail," Commission chairman and Conservative lawmaker Andrew Tyrie said in the report.
It added: "A criminal offence will be established applying to senior persons carrying out their professional responsibilities in a reckless manner, which may carry a prison sentence."
The Commission, which included Archbishop of Canterbury Justin Welby, the Church of England's spiritual leader, as well as lawmakers from across British political parties, recommended also that the state-rescued Royal Bank of Scotland (RBS) should be split into a so-called good bank and a bad bank.
It also criticised the government for "political interference" in both RBS and fellow bailed-out lender Lloyds Banking Group.
The review was published ahead of finance minister George Osborne's annual Mansion House speech to business leaders later on Wednesday, when he is expected to address the government's privatisation plans for RBS and Lloyds.
Lawmakers and Welby additionally called for "much more (of bankers') remuneration to be deferred and, in many cases, for much longer periods of up to 10 years" to "reflect the longer run balance between business risks and rewards".
Tyrie added that "recent scandals, not least the fixing of the Libor rate... have exposed shocking and widespread malpractice" within the nation's banking sector.
"Taxpayers and customers have lost out. The economy has suffered. The reputation of the financial sector has been gravely damaged. Trust in banking has fallen to a new low."
Industry body the British Bankers' Association on Wednesday said it would work alongside the government to implement what it described as "constructive proposals".
Libor, which is calculated daily using estimates from banks of their own interbank rates, has been found to be open to abuse, with some traders lying about borrowing costs to boost trading positions or make their bank seem more secure.
On Tuesday, Britain's Serious Fraud Office charged the first person, former UBS bank trader Tom Hayes, in connection with its Libor probe.
The BBA -- which will lose its role of Libor rate-setter in the wake of the rigging crisis -- last week unveiled proposals aimed at preventing manipulation of the system.