By Huw Jones
LONDON (Reuters) - Whistleblowers in banking are being gagged and risk ending up broke and unemployed despite reforms introduced since the financial crisis, a senior British lawmaker said on Tuesday.
Lord Cromwell, co-chair of the All-Party Parliamentary Group on Fair Business Banking, said the American system of compensating whistleblowers should be looked at given the financial hardship that people who speak face.
"What actually happens to whistleblowers in our system is they become unemployable, they have their lives trashed, and they are heavily persecuted in the most intimidatory way," Cromwell told Reuters on the sidelines of a conference on conduct in banking.
"In America, if you are a genuine whistleblower and an eyewatering fine is imposed on the institution, you get a share of that - and you are going to need it."
"You pay for vermin control, so why do you expect people to do the right thing for nothing and then have their lives destroyed," Cromwell said.
Tougher whistleblowing rules was introduced after the 2007-09 financial crisis, but they stop short of offering financial rewards. The all-party group will now hold meetings to look at how whistleblowing is working.
The industry is also waiting to see how the Financial Conduct Authority deals with attempts by Jes Staley, chief executive of Barclays (L:BARC) bank, to unmask a whistleblower's identity.
Norman Blackwell, chairman of Lloyds (L:LLOY) bank, told the City & Financial conference there should be the option of speaking out anonymously, and a crackdown on penalizing anyone for speaking out publicly.
Robert Francis, a barrister who led a government review into whistleblowing in Britain's public healthcare system, said a "re-employment" scheme for staff who often face job loss if they turn to employment tribunals, would be better than a financial reward.
"The law isn't hitting the target," Francis said.
Anthony Belchambers, chairman of Saxo Capital Markets, said that a decade after the crisis began, the industry was "shamefully slow" in improving conduct.
There was a risk that a "morass" of new codes could become a "bit of a mess" and not be enforced properly, Belchambers said.