Financial services will never rebuild trust with consumers or affect a change in the sector unless custodial sentences are imposed on those guilty of criminal wrongdoing, Chuka Umunna, shadow business secretary has said.
Speaking at an event in London yesterday, Labour's Umunna said for the City to continue to perform its functions as a global financial hub and provider of finance to the real UK economy, it must command trust and confidence.
To achieve this, it must be seen to punish those who do wrong, he said, giving the example of the LIBOR rate rigging scandal as one area where he would like to see prosecutions.
"It cannot be right that someone who seeks to cheat the benefits system out of a couple of hundred pounds in my constituency may well be thrown into jail for doing so, but those who seek to rig the financial system and receive hundreds of thousands of pounds as a result never seem to suffer the same fate.
"Is not the prospect of jail for gross wrongdoing one of the best ways we can affect a culture change?" he said.
He said regulators and the government have a role to play in the governing of the financial sector, but that supervision and regulation cannot act as a substitute for trust.
"You cannot regulate or legislate for being trust worthy. If the sector is to recover trust, it needs to be seen to very visibly be getting its own house in order."
He called on the financial sector to come together to create a public summit of the key industry leaders where action points for improving the sector can be agreed and then implemented.
On Labour's record of financial services regulation he admitted that his party should have better regulated the banking sector during its time in office.
"But we didn't and that is a source of regret."
It was under Labour that in 1997 the Financial Services Authority - which oversaw regulation during the worst financial crisis for a generation - was created.
The body has now been replaced by the coalition government with the twin peaks regulation of the Financial Conduct Authority and the Prudential Regulatory Authority.
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