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By Sarah White
LONDON, Sept 13 (Reuters) - Will top bankers' behaviour everland them in jail? Or are bad business decisions even a crime atall?
Five years on from the bankruptcy of Lehman Brothers, thedebate over how to hold senior bank bosses to account forfailures is far from over, but legal sanctions for topexecutives remain a largely remote threat.
Even as laws evolve - in Britain, the government wants tocriminalise recklessness in banking - a repeat of the globalfinancial crisis and near-collapses of 2008 would notnecessarily result in many more prosecutions today, lawyers say.
At issue is the difficulty in pinning the blame on any oneperson for risks and decisions taken throughout a firm - one ofthe main obstacles to building such cases so far.
"It's a case of the confused lines of responsibility andaccountability," said Judith Seddon, director in law firmClifford Chance's business crime and regulatory enforcement unitin London. "When you're pursuing an individual, if they'vedelegated responsibilities ... it's much more difficult in a bigorganisation."
Regulators the world over stepped up their scrutiny of banksand cracked down on financial crime in the wake of public angerover costly bailouts and subsequent scandals. But that has sofar translated into relatively few attempts to bring chargesagainst those in the highest echelons of banking.
In the United States, home to Lehman Brothers, no topexecutives at large Wall Street or commercial banks have beenconvicted of criminal charges relating to the 2008 crisis.
Across Europe, the implosion of Iceland's financial sectorfive years ago has resulted in some of the most prominentconvictions so far, with the former chief executive of failedlender Glitnir among those sentenced to jail time.
In Germany and the Netherlands there have also been isolatedhigh-level convictions, and some landmark cases could yetmaterialise. The entire former executive board of German lenderHSH Nordbank is being put on trial over actions takenin the run-up to the crisis.
But in Britain, where Royal Bank of Scotland andLloyds were bailed out to the tune of 66 billion pounds($104.37 billion), no senior bankers faced criminal charges.
Three executives at Ireland's failed Anglo Irish Bank face trial in 2014, five years after the probe into the lender began,while in Spain, around 100 people are being investigated bycourts over failings at banks devastated by a property marketcrash, though none have gone on trial.
RECKLESS BANKERS?
The low rate of convictions partly stems from the fact thatin some countries laws which could have addressed the way thatbanks were run simply did not exist.
Britain's Finance Minister George Osborne said in July hewould adopt recommendations made by an influential body oflawmakers that bankers should face jail for a new offence of"reckless misconduct in the management of a bank".
"The regulator has got to be holding people personallyaccountable for their actions. They need to be frightened of theregulator, which certainly wasn't true in the past," said MarkGarnier, a Conservative member of the Parliamentary Commissionon Banking Standards.
In the United States, federal prosecutors are stillexploring new strategies for criminally charging Wall Streetbankers who packaged and sold the bad mortgage loans behind thefinancial crisis, including using an old law intended to punishindividuals for scamming commercial banks.
Britain's push to create a "recklessness" offence could intheory make it possible to punish senior executives for takingmisguided decisions. But proving that such decisions were maderecklessly at the time could still be tough.
"Board level meetings are carefully minuted and you mighttherefore have detailed evidence, but however reckless someoneappears with the benefit of hindsight, will it stand up incourt?" said Gregg Beechey, a London-based partner at law firmSJ Berwin. "You wouldn't get the whole board to vote for anacquisition if the case wasn't reasonably convincing at thetime."
U.S. regulators' approach since the crisis has reflectedsome of these challenges. Although the Securities and ExchangeCommission has charged over 150 firms and individuals inrelation to the financial crisis, critics have still said it hasnot done enough to go after high-level bank executives.
"We go where the evidence leads," former SEC enforcementdirector Robert Khuzami has said in the past, noting that casescould not be brought against people merely for "bad judgment".
A perceived lack of political will in some countries topursue senior bankers and firms could also cloud future cases.
Despite costly state rescues in Spain for example,mainstream politicians have shied away from calling forinvestigations into various failures in the same way as Britishones, after the UK government came under pressure from anintense public backlash in the wake of the crisis.
"(In Spain) it's more an absence of any willingness to pursuethe cases than because of a lack of tools, as some cases couldbe proved without much difficulty," said Juan Torres, aneconomics professor at the University of Seville, adding thatsome related to clear instances of fraud.
Claims from customers and activist groups have instead ledSpain's High Court to investigate several high-profile failures,including that of Bankia, which was bailed out in 2012less than a year after listing on the stock market.
Frustrations over the slow progress of legal probes in Spainis even leading some activist groups to consider lobbying theUnited Nations to list economic crimes as a crime againsthumanity, even though they admit it is unlikely to happen.
If the scope for legal prosecutions of senior bankers hasnot broadened drastically in the past five years, however, someargue that life at the top is much harder than it used to be, inpart as countries pursue other lines of action.
"Regulatory tools can be more powerful than criminal law,although whether or not it's what the public want to see isanother question," Beechey at SJ Berwin said.
"There's more of a sense with regulators that they can dothings without fulfilling the burden of proof, and they aredefinitely working to try and pursue senior management more andmore."
For a story on what has happened to risk in banking fiveyears on from the Lehman collapse, click on
