Stream Of Scandals

He’s making the push as a stream of scandals at large global banks continues to hurt the finance industry’s reputation. Penalties levied by regulators in the foreign- exchange probe alone have surpassed $10 billion, and a dozen banks and brokerages have been fined about $9 billion for manipulating the London interbank offered rate.

A database would have to clear several significant hurdles before being implemented. Banking lawyers and executives say it would likely need congressional approval to provide liability protection for banks reporting misconduct by former employees. A draft of what could eventually become proposed legislation has the backing of industry executives but needs to be presented to “the right people in Congress,” according to Cohen.

Banking executives say employees would need to be able challenge the registry in court and defend themselves against false accusations. Other questions include whether offenses would be deleted after a certain number of years, and whether information technology workers, in addition to traders and executives, would be part of the database.

Six-Year Search

Under a U.K. plan due to take effect in March, banks and insurance companies must get information for some new hires going back six years, and employers must say whether former employees had received disciplinary warnings or punishments. The U.K. already has a public registry showing whether regulated financial services employees are in good standing or have been banned, similar to a broker database in the U.S. operated by the Financial Industry Regulatory Authority.

The Group of 30, made up of prominent former regulators and financiers from around the world, said in a July report that employers should conduct full due diligence on the employment history of potential new hires and suggested that authorities consider a registry.

The system being discussed in the U.S. would initially cover firms supervised by the Fed, the Federal Deposit Insurance Corp. and the Office of the Comptroller of the Currency. It would be maintained by the regulators using information from the banks. Asset managers, hedge funds and private equity firms might eventually be able to opt into the system.

Triggering Event

Under a registry, the so-called triggering event for getting listed would be an employee’s departure. Banks would have two main obligations: to report misconduct, and to check the registry before making a hiring decision.